This drop right now is the result of one factor: For the past several months, homes have been "on sale" as the government has given people generous rebates when they bought a new home. The rebates ended, and sales are down. These rebates did two things: First, they gave the illusion that home sales were really picking up because they pulled sales from later months. People who might have waited a few months before buying a home decided to do it earlier because they didn't want to miss the rebate. So the home that may have sold in Novemeber without the rebate instead shows up in April's sales because the buyer moved the decision up (making April look better and November worse). Secondly, the rebates create a psychological barrier to buying homes without the stimulus rebate. In other words, many people who are considering buying right now are prone to wait awhile, wondering if the government is going to institute another program. It's the same reason I wont buy an appliance at Sears unless it's on sale (because I know at some time in the near future, it WILL be on sale!)....

The auto incentives had the same effect. They pulled sales forward making things look better than they were, then created a drop off on the back end.

The best thing to do would be to quit offering incentives and tinkering with the system and let it stabilize wherever it stabilizes. Only then will we REALLY know what the numbers are.

If the prices come down to reasonable or historic levels, there will be some movement as that will qualify people who can't because the prices are too high.

prices are coming down, but the fear is they will come down so far contractors and their subs will not be able to make any money. I own a sub contracting business, and have seen labor prices drop 30-40% and my employees area making 10-20% less compared to three years ago.

How do we earn a living if house prices keep dropping?

If prices come down and salaries come down, other things come down as well...it's mostly relative.

Have you ever thought that the majority of people in America are overpaid to begin with, and that salary increases every year are just not sustainable?

clearly you are not in touch with reality. your saying the majority of America is overpaid by what standard. compared to nigeria yes, but compared to each other no. you have to take the word 'majority' out.

those who are overpaid are in the minority. tell those in the midwest they are overpaid, and they will have definite issues with you. tell the single parent making 40,000 a year they are over payed and they will have a problem with you as well.

if America is to recover, our profits must remain flat for several years, but we must maintain what we currently have.

James, hope you are speaking for yourself. Where have you been the last few years?? Annual salary increases, no, annual workload increases, hell yes. I am now doing 3.5 jobs and still only getting paid for 1. No raise last year and a week furlough (= pay CUT).

And I still consider myself one of the lucky ones that still have a job.

Having said that, there is fat to cut in salaries, but it's at the top and definately NOT the majority.

Shanecon siad: "if America is to recover, our profits must remain flat for several years, but we must maintain what we currently have."

This may possibly be the dumbest thing ever said on newsvine.

@shanecon

I am in touch with reality...that's why the majority of people I know have had their salaries cut at least because companies either had to A) cut staff or B) cut salaries to stick with demand.

What we have in this country is an attitude that things can only go up or be good, when in reality, you need to realize that salaries, just like housing prices, can fluctuate or even go down depending on demand.

The majority of Americans are going to have a rough time adjusting to a new lifestyle for themselves..living within their means on a reduce salary.

And the payback hasn't even began yet.

Your idea of "excellent" is pitiful. Are there even as many buyers as there was 10 years ago despite the population growth?

I just closed on a house in DFW yesterday. Sold mine after a very short showing period and got excellent price/sqft. Turned around and bought at an even better price/sqft. Dallas is holding up well, even with foreclosures occurring. Hopefully, more of the markets that were hard-hit will find their bottoms soon and begin rebuilding.

Wow! One whole area in the country is doing excellent! You must be a Realtor or a mortgage broker. LOL!

A big part of that is because many people, mainly rich people, are moving to Texas because they dont have a state income tax. They are also moving to Florida. I know many middle class people from NY who have moved out of the state because the income taxes and the fact that they go up each year. Plus, NY is driving out business with their high taxes. People will follow the jobs.

I'm not in the RE biz - just a consumer that doesn't rely on Obama Bucks to provide for me. There are areas other than Dallas that are recovering as well. It's just a matter of whether the area was in a bubble in the first place. We didn't have the ridiculous run up that other areas had, so we didn't have as far to fall when foreclosures hit.

James, right on the money with the pre-2000. I bought my first house in Dec 1999. 143k, well within the realm of reality.

250k+ not so much.

Also of note are the tidal wave of homes bought from 2002-2007. Everyone already has a place to live, unfortunatley they payed double what it's worth.

going backwards does not fix the problem. we are a nation who should look to the future. Keeping prices steady for the next few years might help, but how do we make something like that happen?

Hang on to your house, rickaroo, you have made a wise purchase

Going backwards does fix the problem.

Backwards before pre-2000 levels had things like 15% down required to purchase a home, a 30 year mortgage was standard and they forced you to only spend around 35% of your take home income on a mortgage.

Rickeroo..just imagine where I live where a 1BR condo was around 100K in 2000 and shot up to 350K-400K in 2007....stupidity.

if going backwards fixes the problem, we should all take a huge cut in pay as well. shoot, we should only be paying 6,000.00 for a new car.

look to the future. not backwards. backwards does not fit into any logical solution.

i agree with the mortgage standards, but to drop prices to pre-2000 will only help with our out of contol economy.

A lot of America probably does need to have a paycut (especially government)...because the majority of people are over-paid in this country for jobs they do. That's why costs have risen so drastically...not because of materials but because of the bubble economy and how it also over-inflated salaries.

This is also why so many people are not finding jobs...they are asking for salaries that just aren't reality anymore.

Shane,

The basic problem is that one should not buy a house that is more than 3 times the household gross income. That has been a basic idea, and has not changed. While prices shot up by 300% from 2000 to 2007, nobody's income shot up by that amount. Mine certainly didn't. Even with several promotions, the home I can buy in my area with my income is still worse than with my income in 2000. That's a fact. When you have an area where the median household income is around $50,000, and the median house is $350,000 (as it still is in my area) -- there is a problem.

There are only 2 solutions to this problem: incomes go up or home prices go down. For incomes to go up so much would merely cause massive inflation and thus the real prices of homes would go down anyway. So really, the only realistic option is for home prices to go down. Even though they've dropped 30% from their peak, they are still more than double the values in 2000, and incomes have not doubled since that time.

Exactly but what did change were the lending rules. That's what f'd everyone.

We really need to put rules in place that are blanket rules across the industry.

10-15% down mandatory. Stops flippers and investors from buying lots of properties and makes homes about living in.

30 year fixed loan for no surprises.

No more then 35% mortgage payment per month of your take home income for a family. You want a bigger house, put down a bigger down payment.

You do things like this and make it mandatory, then housing will adjust accordingly. The problem is the people writing the rules are in bed with the banks and real estate.

The money to pay for this should be funded by the government

This way of thinking borders lunacy. The gov't can't help you. They are inept ! Get it ?

we should have a giant land give away, similar to the idea from the 1800's to populate the west. we can give away the worst of the foreclosed homes first.

The government can't "fund" anything. They don't have any money to fund it with, it's OUR money. When you talk about the government "funding" something just insert "I" or "we" or "us". That's part of the problem with a lot of the good folk's thinking in this country, they don't get the connection between the governments handouts, giveaways, and just plain pounding money down every rat hole they can find, and their own wallets.

@wlockridge

Yah people don't 'GET IT' that the governments money is the taxpayers money. They don't fund anything. WE the people do.

The current administration is destroying this country with their spending. Remember from 2006 on it was a democratic controlled government...and democrats love spending other peoples money.

JackNSoCal wrote "Reducing the supply of homes will stabilize the housing market, and those who own homes will stop the bleeding."

So, you want to keep house prices high and reward owners that purchased within the last five years while punishing all future house purchasers?

Wlockridge-

Yes I'm aware that it's OUR money. Like I said, there's no perfect solution. The reality is that the government keeps throwing OUR tax dollars in ideas such as tax credits and bailouts that simply have been proven not to work. OUR tax dollars will be spent one way or another- that's just the reality.

The problem our gov't is not understanding is that we need jobs before we can fix housing. Demolishing all the foreclosed properties will in essense be killing two birds with one stone. It would provide jobs (if temporarily), and it would be reducing the supply of housing, therefore allowing us to reach a true bottom.

Vincent Denali-

I'd like for more then anything for homes to decline as much as possible, as I, myself am trying to buy my first home right now. The problem is that there aren't enough people like me who have stable jobs and savings in this country, and far too many people who are losing their homes and defaulting on their loans.

Why do I care?

Because if everyone walks away (whether strategic or not) from their homes, then the banks and lenders collectively would all collapse.

That means ALL future home purchasers would have to buy a home with cash.

That means no one could provide me a mortgage. If a 4 BR house right now is 'worth' $700k, and dropped half of it's value, I would not have enough cash to buy it straight up...and I can't imagine too many people that would have $350k in cash either.

So would real estate dropping by another 50% really help mine and other prospective homeowners cause? Not unless you have a ton of money under your mattress.

No banks, means that small businesses would die off due to lack of cashflow, worsening the unemployment problem. That means no one would be able to work for themselves anymore, and would resort to me and you competing for jobs at huge corporations like Walmart who would exploit us by paying slave wages with no benefits.

It will crush what's left of the middle class.

Does that paint a much better picture?

When their houses don't sell, reality will set it.

What we really need are true appraisers to come in and look at what went on from 1999-2008 or so for an area, determine how many loans, houses, etc were investments, flippers, subprime or liar loans, over-building, etc and try to get a 'real' price range for homes in an area with standard inflation, etc.

We really need a neutral opinion on housing values so people can feel they are being given honest information.

If you allow it to stay in the hands of banks and real estate agents, then we will never have realistic prices and valuations on homes.

Dont forget Obama. He was a big part in his 3 years in the senate of getting money to Freddy Mac and Fanny Mae to give mortgages to people who couldnt afford them

Really? Lobbyist dont give you huge amounts of money for nothing, dumba$$

http://nmorton.wordpress.com/2008/09/16/barack-obama-fannie-mae-lobbyists-second-favorite-senator/