Wednesday, December 7, 2011


The economy seems to have picked up in the second half of the year. But apparently no one told the housing market, especially the modular housing industry.

Home prices continued to fall in October, even as sales of existing homes picked up and homebuilders applied for more permits. After stabilizing this summer, prices fell at a 7.5 percent annual rate in the three months ending in October.

Fall is typically a slow season for real estate. But with more than four million homes in the foreclosure pipeline, that unsold inventory is overshadowing the market's normal seasonal patterns.

Those "distressed sales" are the biggest single factor weighing on prices.  Homeowners trying to sell their house, though, can't "factor out" those sales as each new foreclosure "bargain" sets the benchmark for every other house on the same street.

The glut of unsold foreclosed homes is expected to continue to weigh on prices as demand from buyers remains very weak. As credit standards have tightened, some of those buyers are having trouble getting financing. Realtors reported last month that the level of contract failures — home sales cancelled for a variety of reasons —  jumped to 33 percent in October from 18 percent in September. That's up from 8 percent a year ago.

Falling prices have hurt demand for new homes on the market because those lower prices leave more homeowners unable to sell their house at a price that will pay off their outstanding mortgage. Roughly 30 percent of all mortgages are a now underwater.  Until those homeowners can get out from under that "negative" equity, few of them will be able to afford to make up their "negative equity" and shop for a new home.

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