The economic downturn that began in late 2007 is one of the worst in memory. Certainly, the Great Depression brought about many hardships, but few people living today experienced its direct effects.
Incredibly Shrinking Market
Most Americans are aware that the housing market is in a historic downturn. Millions of homes have been foreclosed, consumers are finding it difficult to refinance and home values have plunged. Speaking of home values, Zillow – the online real estate marketplace – has pegged that loss at $1.7 trillion for 2010, bringing the total loss to $9 trillion since prices peaked in 2006. Notably, Zillow says that home values have declined at an even greater rate in the second half of this year.
“Despite a strong start to 2010, by the end of the year homes lost more of their value in 2010 than they did in 2009,” said Zillow Chief Economist Dr. Stan Humphries. “Government interventions like the homebuyer tax credit helped buoy the market during the second half of 2009 and the first half of 2010, but we saw a renewed downturn in the last half of this year. It’s a testament to the nearly irresistible force of the overall market correction that government incentives can only temporarily hold back the tide, and that the market will ultimately find its natural equilibrium of supply and demand.”
Fed Incentives End
Congressional involvement helped to prop up the market, but the later downturn was eventual. Humphries expects the market to drop further in the first half of 2011, increasing the number of people who have negative equity in their homes. That rate is now at 21.8 percent of all homeowners with mortgages, perhaps increasing the likelihood that people will abandon their homes thereby driving prices down further.
Zillow estimates America’s total home valuation to be $22.7 trillion as of December 2010. That’s down from about $31.7 trillion in 2006. Zillow notes that the loss is equal to the cost of fighting 12 Iraq Wars, a price tag which eclipsed $750 million in September 2010.
Not every market has seen home prices drop over the past year. Zillow notes that home values have increased in Boston and in several California markets including Los Angeles, while Detroit, Miami and Atlanta were among the markets recording double-digit decreases for the year.
Ready to Sell?
For homeowners preparing to sell in 2011, the reality is this one: what you think you can get for your house may be far higher than what someone is willing to pay for it. Make certain that local comps are current and truly reflect your market to price your house accordingly.
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