In some of the worst housing markets in the country, deflation has reached double-digit proportions. While housing woes have spread around the country, California appears to be poised to rank among the worse. One of the primary reasons for this is the fact that in the last few quarters California has experienced the largest rate of deflating home prices. In fact, home prices in California have fallen to levels that have been unprecedented.
Miami, Florida has also proven to be a difficult market at the moment. The weak mortgage market and record high rates of foreclosures have led to declining home values as well. In fact, Miami has been among the worst home markets in the country for two years running. The condo boom in Miami just a few years ago has further fueled the problems that have now spiraled into a massive real estate bust.
While California and Florida may have been easy to predict as being among the first housing markets to crumble when the national real estate market crashed, there were other markets that were on the cliff of falling which have not been as easy to predict. One of the primary reasons that California and Florida were poised to fall so rapidly were the rapidly escalating home prices during the boom a few years ago.
Other markets did not rise as much or as quickly, which could be one reason why they have managed to avoid reaching the top of the list; at least until now. These markets include Arizona, Nevada, Indiana and Massachusetts. Declining home values as well as high rates of foreclosures in these states are also contributing to their worsening real estate market conditions. In many other states, like Michigan for example, where layoffs have been significant, the local economy is playing a strong role.
To make matters worse, the problems are expected to grow in many markets as several million adjustable rate mortgages are scheduled to be reset in the coming months. As these mortgages are reset, it is logical to assume that even more homeowners will find themselves facing the reality of being unable to pay their monthly mortgage payments in certain markets. When that happens they will be forced to either face foreclosure or in some cases make a short sale on their home as refinancing is becoming less and less of an option for many homeowners.
According to most statistics, the remainder of 2008 and early 2009 are still poised for problems in the housing market. Many indicate that home values could continue to drop and new homes could experience a loss of up to 18% before the year is out.
While there are some indications that the market could begin to level off at the end of 2008 or the beginning of 2009, many experts are quick to warn that when the market does begin to rebound it will not reach the point where it left off. In comparison to the housing peak of 2006, the rebounded market could still be quite a bit lower. Part of the reason for this is that in many areas, prices escalated so quickly that there is simply no way for prices to rebound back to the same level within a few short years.
Investors (and home buyers) may soon find the relief they have been seeking since they were forced out of the market. However, it may be longer before homeowners begin to experience the same kind of recovery. This is because most are still reluctant to sell and lose the equity they once had in their homes. The truth is that many homeowners have yet to accept the fact that they can no longer sell for the same price that was possible just a few short years ago.
Still, there is hope.
In many markets the sub-prime mortgages have left the market through short sales or foreclosure. And with the recent federal stimulus package and the more recent $700 Billion financial bailout package, there is anticipation that the housing market will get the boost in needs.
Successful real estate investing is about timing. Interest rates are at historic lows, housing inventories are at 20-year highs, and housing prices have dropped 16.3% nationally since last year. Now is a good time to position yourself for real financial wealth by buying real estate in markets positioned for growth over the next three to ten years.