Home Prices Continue to Sink: "You can't put lipstick on this pig."

from Bloomberg:



First Quarter U.S. Home Prices Fall 3.1%, Ofheo Says (Update1)

By Bob Ivry and Kathleen M. Howley

May 22 (Bloomberg) -- U.S. house prices sank 3.1 percent in the first quarter from a year earlier, according to a government report, as buyers waited for values to stop falling.

Prices for previously owned single-family homes fell in 43 states, with values in California and Nevada tumbling more than 8 percent, the Office of Federal Housing Enterprise Oversight, known as Ofheo, said today in Washington.

Potential buyers are waiting for prices to hit bottom, causing the inventory of unsold properties to swell. People who are ready to buy face difficulty obtaining financing as lenders tighten standards and cut back on the number of mortgages they are writing, according to Paul Kasriel, chief economist at Northern Trust Corp. in Chicago.

``It's a dismal picture, there's no way around it,'' Kasriel said. ``A complicating factor is the fact that so many homeowners owe more on their mortgages than their houses are worth. This is a financial crisis. You can't put lipstick on this pig.''

The number of mortgage originations is expected to drop 18 percent this year from 2007, according to the Mortgage Bankers Association.

Reduced Lending

Almost two-thirds of U.S. banks have raised standards for mortgages to their most creditworthy borrowers, and three-fourths made it more difficult for people with limited or tainted credit to get loans, according to a Federal Reserve survey of senior loan officers published May 5.

Purchase-only prices fell an average of 1.7 percent from the fourth quarter of 2007, Ofheo said. In Ofheo's ``all- transactions'' index, which includes appraisals for refinancings, prices fell 0.2 percent, according to the report. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aS.eKCT.UZ04&refer=home

value of the property has reduced beyond the amount of the existing mortgage. In other words, the bank can't loan the same amount of the existing mortgage and the applicants don't have the money to pay off the existing mortgage (which would defeat the purpose of refinancing).

...if you were dumb enough to pay $500k for a $50k house, then you deserve a financial beating.

If you are looking to buy your first home, then this is the best news ever. If you made a sound decision in buying your home, then this has no affect on you.

The market was artificially inflated by house flippers and speculators, a drop in housing prices is good for everyone who was responsible.

Screw the flippers, but people trying to buy a home for their family, maybe they bought at the wrong time, why be so condescending?

And how is this good for first-time buyers? We are finally looking to buy our first home after years of renting, and I don't see how any of this is good. The prices are not falling fast enough...