Home Prices Drop Nationwide
July 24th, 2008
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The way to get the largest reverse mortgage is to have as much equity as possible. If you have a home without a mortgage, that’s great. If you have a home without a mortgage and the value of the property is rising that’s even better.
What’s not so good is when values fall. That means there is less equity to secure a reverse mortgage and less value to tap. Thus the news from the Office of Federal Housing Enterprise (OFHEO) is not what anyone wants to hear: home values fell 4.6 percent nationwide between April 2007 and May 2008.
If you were selling a property and had been a long-term owner the fall in value would have little practical effect because you would be losing paper profits. However, many people are recent owners and they bought with little or nothing down. The result? They cannot sell without a loss.
Unfortunately, some of these very same recent owners also cannot stay. They have toxic loans with rising mornthly payments. Many will sell at a loss, rent at a loss or be foreclosed. They will devalue neighborhood properties.
The chart below from OFHEO shows where we are: Essentially prices have fallen to 2005 levels — bad news for many of the people who bought during the past three years.
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