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Irvine Mortgage Blog - The recent release of the New Homes Sales report for August shows that sales dropped sharply by 8.3% from last month. Down to 795,000 from 867,000 in July. The August median new home price was down as well by 7.5% from the month prior. Some of you may be aware that the median price for existing homes actually increased this month. What you may be unaware of is that’s not a very good sign for homeowners.
The New Home Sales median sale price more accurately reflects current market conditions than the current existing median sale price because it’s the price builders are selling new homes for, and since builders can’t afford to let home sit on the market because of holding costs, they lower the prices until the homes start to move. The existing home median sale price, however, is largely out of whack these days because a lot of homeowners don’t need to sell, they just want to, so they can afford to let the home sit on the market for a while and hold out if they don’t get their asking price, or they can just take it off the market entirely. Most of these homeowners are holding out for prices to rebound so they can maintain profits or minimize loss and this holding out is exactly what is skewing the existing median sale price.
The Bad News For Homeowners
You knew it had to come, a little more bad news to top off what’s already going on in the housing market. When analyzing the existing median sale price, you should also take into account the trend for existing home sales. Reason being is if the existing median sale price stays the same or increases, and existing home sales drop, you know you’ve got a discrepancy between what buyers are willing to pay and what sellers are willing to accept. Well, according to the National Association of Realtors, existing home sales are down 4.3% from last month and 12.8% from last year. My guess is buyers won’t be budging much in the near future so prices will hang on for a short time, but soon, those sellers are going to start becoming more and more motivated as they realize the market isn’t going to ease up on them, eventually they’ll just bite bullets and start accepting lower offers; when that happens, values will drop quite a bit more than they already have in the Irvine and surrounding areas.
What If You’re A Homeowner In The Irvine And Surrounding Areas?
Make sure you’ll be ok if your home takes as much as a 20% dive in value from here on out. A lot of you with fixed rate mortgages who don’t plan to move will be fine, you won’t even notice the storm right outside your door. However, those with rates that will be adjusting over the next 1-3 years or those that may be selling within that time frame need to take a serious look at whether they can absorb a 20% drop in value. If not, you need to get working on a plan as soon as possible. If you’re unsure, I can help you develop a plan, just contact me using this form , or give me a call at (888) 409-7070 x603 during normal business hours and we can discuss your options.
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