Home Values Took A Dive In November

[Dec 24, 2008.]

 

According to the National Association of Realtors, existing home sales fell 8.6 percent to a seasonally adjusted 4.49 million units in November compared with October. Relative to the same period a year ago, sales were down 10.6 percent.

The national median existing-home price for all housing types was $181,300 in November, down 13.2 percent from November 2007 when the median was $208,800. The drop in existing-home prices is the largest since the Realtors began collecting data in 1968 and likely the largest decline since the Great Depression.

The drop in home prices can be attributed to several factors. A record number of homes currently listed for sale are distressed properties. The home owner is either looking to avoid foreclosure or has already walked away from the property. The owners of these homes are desperate to sell and price them accordingly. This brings down the value of other homes in the area.

Buyers are also sitting on the sideline which is leading to an oversupply of homes. Economic uncertainty, fear of lay offs, and overall lack of consumer confidence in the economy has many buyers waiting to take action.

This is bad news for those homeowners who were considering tapping their home equity via a home equity loan or line of credit. As home values continue to decline, the amount of available equity that can be borrowed against also disappears. Many homeowners will no longer qualify for a home equity line of credit and those that do will be faced with much smaller credit lines.

If you've been thinking of applying for a home equity line of credit but have been putting it off, you are strongly encouraged to take action before home values drop even further. Once the market rebounds, you can always refinance the home equity line of credit to take advantage of higher home values.

Most economists believe prices will continue to decline until the economy gains some footing, consumer confidence increases, and the government steps into provide incentives for buyers.

 

About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges.