Some people are stunned that home prices continue to sink as if a lead weight was placed on the value of housing. The mainstream press never sliced and diced the minor jump in prices we had last year because much of the increase occurred around tax credit gimmicks and the Federal Reserve using artificially low rates to drum up demand where none existed. In the end this has been a vastly expensive proposition that failed to address the main problem with housing. Home prices need to drop or household incomes need to increase. The housing bubble only occurred because of lax credit and massive speculation.
Year 2010
Area Brockton
Median Income $59,691.00
Median Home Price $175,000
Home Price to Income Ratio 2.93%
On the surface the Brockton market looks affordable. Last year people were clamoring how cheap these markets were and many investors jumped in to pick up properties. Many were looking to do a quick flip or for rentals. Whether a flip or finding a renter you have to find someone living in the immediate area to occupy the home. Those who were led into the market because of the appearance of low prices actually are now dealing with the second phase of the housing correction:
Number of Sales
Jan – April 2010 - 175
Jan – April 2011 - 150
Percent Decline - 14%
Median Sale Price
Jan – April 2010 - $175,000
Jan – April 2011 - $155,000
Percent Decline - 11.5%
Brockton is now down over 11 percent in value from last year. Keep in mind that most of the home buyers purchased homes with FHA insured loans that only required a small amount for a down payment. These people have lost all of their equity and are now underwater. Was the tax credit worth it? Obviously not since the down payment plus additional money has vanished into thin air.
With jobs still being lost, yes I will say at a less alarming level, many more homeowners could be in trouble. The bottom line is we are facing a double dip housing recession because incomes are not going up. No amount of Federal Reserve hocus pocus is going to make home prices go up without making household incomes go up.
Bobbie Files, C.D.P.E.
Certified Distressed Property Expert
Your Bristol and Plymouth County Realtor
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