Growing up I always heard, “ buy a house it will go up in value; you can’t loose money in real estate”. We have seen ups and downs in the real estate market, but prices always snapped back fairly quickly, but not this time. Young people just entering the housing market will have the great American opportunity to buy a house cheap perhaps a lot cheaper than their brothers or sisters who bought just a couple of years ago. They may make money on their real estate purchase or they may at best just stay even. The number of people who have lost significant wealth with the decline in the value of their homes is
The wealth of American families plunged nearly18% in 2008, erasing years of sharp gains on housing and stocks and marking the biggest loss since the Federal Reserve began keeping track after World War II.
The Fed said that U.S. households' net worth tumbled by $11 trillion -- a decline in a single year that equals the combined annual output of Germany, Japan and the U.K. The data signal the end of an epoch defined by first and second homes, rising retirement funds and ever-fatter portfolios.
The list below shows the 10 worst performing residential real estate market in the United States according to a recent report presented by AOL expressed in term of discount that is being taken to sell a house.
|City||Discount||% of sales||Reg Price||Foreclosure Price|
|Minn St Paul||34%||26%||$210,000||$114,300|
I have to tell you I was shocked at some of the cities listed above. No cities were listed from Florida or Texas and that Pittsburg would have the largest foreclosure discount at 59%. Who would of thought that the average foreclosure price in San Francisco would be $230,000?
I like you have seen the ads on the Internet for foreclosed property but the idea that you could buy a house in Pittsburg in foreclosure for $35,000 is just mind blowing. I have a friend and client who lives in Scottsdale and he tells me that he has seen discounts close to 50% on some houses.
I bring up the issue of net worth lost in housing as part of the two edged sword of jobs and housing that we have to deal with if we are going to truly turn this economy around. In just about 2 months from now the Fed will stop buying mortgage loans in the open market. Most experts do not know for sure what will happen to the mortgage market when the Fed pulls out as the buyer of last resort. Some experts feel that interest rates will have to rise in order to attract new buyers to replace the Fed. If interest rates for mortgages rise then what will be the impact on both new home sales, resells and refi’s? The cost of money could go up which could put pressure on many sections of the real estate markets and new cities may replace those on the list perhaps at greater discounts.
We are in uncharted waters with what is happening in the credit markets only time will tell if the next generation of Americans will actually make money in the real estate markets.