There was, once upon a time, a place in America where real estate was a solid investment guaranteed to produce dividends. Families borrowed on their nest eggs to pay for college and the less than needed cars, boats and big screen televisions. For the time being, that is no longer applicable. Home prices fell in 18 of 20 cities tracked by Standard & Poor’s Case-Shiller home-price index released Tuesday. Phoenix is the only city to show an increase, while Atlanta, Detroit and Chicago exhibited deep declines. All this by comparing November data to 2010 statistics in Atlanta, Las Vegas, Seattle and Tampa. Prices have fallen 33 percent nationwide.
There is a bright side to this gloomy picture. Most of the housing in the midstate wasn’t susceptible to the housing bubble. Middle Georgia didn’t see the spike in home prices experienced in other parts of the country. However, the housing market not only faces the glut of housing, there are more troubling rules in place to make sure we don’t hit a wall again. While these rules might help in the long run, at present they are encouraging banks to be stingy.
Pristine credit and a large down payments are the rules of the day. And there are still a million homes in the foreclosure pipeline. There are estimates that we won’t reach previous levels of home value for another five years with many homeowners hanging on as their properties go below the waterline.
The economy is battered from at least three sides. Those who can afford to buy another home are waiting and those who see real estate as a solid investment are sitting on the sidelines to see if the market improves with some uptick in prices. Finally, there are those who could have qualified under the old standard, which were not standards at all, who are now shut out of the market.
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Until the housing market improves, we cannot claim an economic recovery. So much of the economy depends on housing -- from builders to carpet manufacturers to furniture stores -- that until the market for homes recovers, we will continue to see the economy limp along.
-- Charles E. Richardson, for the Editorial Board