I wished everyone just listened to my advice and sold. After yesterday’s huge decline, the market seems to be down again after the May home sales number missed expectations.
Even though May home sales rose to a seasonally adjusted rate of 4.77 million, it is modest at best and the picture is still very fragile. With one third of every home sold being a foreclosure or a distressed sale, the normal housing market still looks pretty dead, not to mention that the national median price just keeps getting killed (it currently sits at $173,000, down 16.8 percent from last year).
Even when people want to buy, it’s hard to get a loan to close on the house too. With falling prices, appraisers won’t lend out more money than a comparable house sold for. Let me give you an example. Let’s say that the house you want to buy is asking $400,000 and you agreed. When the lender figures out that the neighboring house was sold for $300,000 a month ago, they won’t lend you more than 80% of that amount. Therefore, the maximum loan amount of your house is only going to be $240,000. In this case, you can either come up with a $160,000 down payment, or walk away. Lately, many of the houses are falling apart because of this phenomenon.
Told you so. The housing market still has ways to go.