Prices nationwide expected to continue slipping

Prices nationwide expected to continue slipping
By Mary Umberger
Copyright © 2010, Chicago Tribune
May 23, 2010
http://www.chicagotribune.com/classified/realestate/ct-mre-0523-mary-umberger-housing-20100523,0,4404568.column


What's your drinking pleasure today — glass half-empty? Or half-full?

For those of you who are betting that our housing headache ain't nearly over (I'm afraid that would include me), consider this little-reported prognostication from Freddie Mac: When the mortgage giant recently made an official request for more money from Congress because it's wrestling with a gigantic shortfall, it said it expects home prices nationwide will decline still further in the coming months.

Freddie sees four contributing factors putting downward pressure on prices: more foreclosures adding to the oversupply of properties that are in the hands of banks; the expiration of the homebuyers' tax credit, which removes a major incentive to buy; its expectation that mortgage interest rates will rise; and continued high unemployment.

Or, if you're in the mood for a cup of cheer, there's this: The Chicago area got a decent report card on a recent analysis of housing markets around the country. It landed on the list of "most improved" among the nation's top 50 metropolitan statistical areas, known as MSAs, in the fourth quarter of last year by PMI Group, a provider of private mortgage insurance.

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We have a lot of company, according to the insurer, which said that of the 384 MSAs it studied, 356 had declining "risk scores," as Chicago did.

PMI's risk-score index measures the probability that house prices will be lower in two years. Chicago, by PMI's measure, squeaked in under the wire in this report, scoring 47.6 on the index. A score of less than 50 suggests better-than-even odds of seeing higher housing prices in two years. In the third quarter of 2009, Chicago scored 60.8 on the index.

The price report

If predicting home price declines is a crapshoot, I can tell you at least two places where the asking prices are definitely down:

•Only a month after he listed his Manhattan penthouse, radio pundit Rush Limbaugh has cut his price substantially, by $1 million. But don't reach for your checkbook too hastily — the price has dropped from $13.95 million to $12.95 million. The 10-room condo, with about 4,600 square feet, has expansive views of Central Park. It also seems to have been decorated by Marie Antoinette, being as it's encrusted with all manner of gilt, ornate murals and room after room of froufrou. Limbaugh says he wants to leave New York because taxes are too high.

•Federal marshals have been trying to sell jailbird Bernie Madoff's Palm Beach, Fla., home since late last year, and the lack of success seems to have surprised some local real estate obsessives, but not all. The original asking price was $8.49 million, but it's now down to $7.25 million. A real estate agent tells the Fort Lauderdale Sun-Sentinel that a more realistic price might be $5.5 million.

But back to Freddie Mac

Maybe we've learned something in the aftermath of the housing boom, after all. Separately from asking for more money, Freddie Mac reports that 95 percent of people who refinanced their mortgages in the first quarter of this year chose fixed-rate mortgages.

More interestingly, one in four of them who were refinancing a 30-year mortgage chose 15-year terms for their new loans instead, the largest percentage since 2004. One reason, apparently, was that 15-year mortgages were offering somewhat lower rates, on average. But another, according to a Freddie spokesman, was that consumers want to pay down their debt faster.

Wouldn't it be loverly?

What price would you put on having good neighbors? How about $4,488, give or take a few pence?

That's the premium in the mind's eye of homebuyers in the United Kingdom. Lloyds TSB Insurance surveyed residents of the U.K.'s 20 largest cities on five standards of neighbor "niceness" — consideration, tolerance, friendliness, tidiness and vigilance — and concluded that people would pay an extra 3,100 pounds, or $4,488, for a house where they got neighbors who scored best within those attributes.

Maybe it's the neighbors

The University of Nevada, surveying the residents of recession-walloped Las Vegas, found that 40 percent of them say they want to live somewhere else.

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