3D: After Debt, Deficit now its turn for Double Dip ( Housing) !!

Home prices have started falling throughout United States, now lower than their March 2009 trough,according to the latest report from Clear Capital. Read Report links here 

It was inevitable, and it was predicted that a surge in sales of foreclosed properties and a big push by banks to facilitate short sales would force home prices down dramatically.

If we see the detail that how it led to lower the house prices:
Bank owned properties Sales include 34.5 percent of the total housing market sales, that add pressure to the already lowered housing price by lowering it 4.9 percent quarterly and 5 percent YoY. US home prices fallen 11.5 percent in past nine months, the rate is highest since 2008. Also, banks allowed borrower to short sale, means borrower can sell less than the mortgage value.

"With more than one-third of national home sales being REO (bank owned), market prices are being weighed down as many markets have not regained enough footing to withstand the strain of the high proportion of REO sales," says Clear Capital's Alex Villacorta.

Los Angeles prices had been improving, and LA is still one of the nation's best performing metro markets right now. Recently, however, prices took a turn, now down 2.4 percent quarter to quarter thanks to 34 percent REO saturation.

"We have definitely seen a number of both short sales and foreclosed properties along the West Side here, and they have definitely taken a hit," bemoans Kerbox. "It hurts to have a very low comp pop up next to your beautiful new home."

While the usual subprime mortgage suspects, like California, Arizona, Florida and Nevada used to rule the foreclosure roost and still have high volumes of distressed properties, the mid-west is seeing a surge in REOs now, thanks to the plain old recession. 40 percent of the Chicago market is foreclosures, 43 percent in Cleveland and 51 percent in Minneapolis. Home prices fell 8.7 percent in the Mid-West during the past three months compared to the previous quarter.

While the foreclosure crisis is abating on the front end, with fewer loans going newly delinquent, the pipeline of seriously delinquent loans is enormous. Banks are now ramping up the foreclosure process after the "robo-signing" paperwork scandal, but at their current pace it would take about four years to process all the bad loans through foreclosure and even longer to sell those homes out on the open market.

While buyer demand is rising, thanks to a slowly improving jobs picture, mortgage availability is still very difficult for the low to middle-income borrower, and falling prices don't help already weak consumer confidence in the housing market. If prices continue to fall further, which they likely will in the short term, the number of so-called "underwater" borrowers, those with negative equity ( means home value is less than outstanding mortgage loan ), will rise even higher, which could in turn result in more loan delinquencies.

Nationwide more than a quarter of all homeowners with a mortgage are in a negative equity position, but in some markets, that number is far higher. 46 percent of Massachusetts borrowers are underwater, according to LendingTree.

The last time home prices fell at this rate, three years ago, they were then boosted by government stimulus in the form of a home buyer tax credit. "A note of caution to those looking for a strong end to 2011: The last time no incentives were in place and distressed inventories were this high, home prices fell sharply," warns Villacorta.

If we see last 2 weeks in terms of headlines, It was started with US mounting debt, deficit and now a problem of housing double dip. 3D together add up more challenges to struggling economy of United States.  Read More

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