Bottom alert? February house prices slow their fall
The five cities with the biggest one-year price dips -- Phoenix (-35 percent), Las Vegas (-31.7 percent), San Francisco (-31 percent), Miami (-29.5 percent) and Los Angeles (-24.1 percent) -- all saw a slowing of their decline. For example, in January the monthly fall-off was 5.5 percent in Phoenix, but "just" 4.5 percent in February. Las Vegas saw a price drop of 4.4 percent in January, compared to 'only' 3.8 percent in February. A few more months of data like this could mean the market is truly finding a bottom.
This is the first month since October 2007 that the 10- and 20-City Composites did not post record annual declines. "While the declines in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some markets," David Blitzer, Chairman of the Index Committee, wrote in a press release. "We will certainly need a few more months of data before we can determine if home prices are finally turning around."
As I wrote in my story Florida Real Estate: Life Among the Toxic Assets, these loses are the result of overbuilding, excessive speculation, record numbers of foreclosures and unscrupulous lending. The downturn started when investors walked away from real estate they could no longer flip for a quick profit. Then those who took subprime loans started to walk when they couldn't afford the drastic increases in their monthly payments and couldn't sell the property or refinance to a better loan. Finally, the carnage moved to those who took prime mortgage loans, but saw their property values drop below the amount due on their mortgage, giving them little incentive to stay in their homes.
As foreclosures start to be bought up, these price declines will slow further. In many of the hardest-hit markets it's now cheaper to buy than pay rent. Two real estate king pins -- Donald Trump and Sam Zell -- think it's time to buy. If all these signs continue to move in this direction, it will definitely be time to send out the "bottom party" invites.
If you're a first time buyer, you can now take advantage of an $8,000 tax credit, which should cover most of your closing and moving costs. And even if you don't qualify, you may want to start looking now. The rule of thumb on real estate bottoms is that if you insist on waiting for the right signal, you'll probably miss it. Particularly when, as is the case with this bottom, there are so many people waiting in the wings.
Lita Epstein has written more than 25 books, including The 250 Questions You Should Ask About Buying Foreclosures.