Home Prices Expected to Keep Falling

Home prices are falling across the country, but there are signs that they're not done falling yet.

"In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them."

"Adding to the worries nationwide are rising unemployment, falling wages and escalating mortgage rates - all of which will reduce the already diminished pool of would-be buyers."

"One reliable proxy of housing values - the ratio of home prices to rents - indicates that in many cities prices are still too high relative to historical norms."

"In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody's Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents."

"The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade."

Full Story: Home Prices Seem Far From Bottom


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