. Many sellers were forced to drop the price not because they overpriced their houses but because the demand is not there.

Um… Prices are dictated by supply and demand. If the price is too high for the demand, then the house is overpriced by definition.

When I looked at mortgage rates vs. home prices a few months back, I concluded lower rates = higher prices, but the correlation is very loose. IOW, you can see a general trend, but things don’t change much from quarter to quarter. IMO, easy to get mortgages are a bigger factor in higher home prices than cost of the mortgage. However, when taken together, the two factors work with synergy to create a housing bubble.

Most Americans decision on whether or not to buy a house depends on what the banker tells them. Introduce predatory lending practices, and a lot of homes start to sell, and prices begin to skyrocket. IMO, although cheap credit and easy credit are factors in the high cost of houses in recent times, easy credit is a much larger factor than cheap credit in driving up home prices.

If I am correct, this means that no matter how much the Fed rate lowering ends up helping mortgage rates, house prices will still come down because supply will continue to outstrip demand. Tighter lending standards are being imposed which will ensure people actually qualify for the loans they’re getting. This will subtract from the percentage of Americans who own homes.

Because home loan percentages will adjust back to normal levels, homeownership levels will continue to adjust back toward normal. This will ensure home prices come down. See the chart in the link for a graphic example of where Seattle house prices are heading.

Homeownship Percentage

We are in a recession, and consumer spending is plummeting. Home prices are had at least for now. In the future, if we see massive inflation, it could go the other way. However, the economic forces in play are currently highly deflationary. It would take a change in current policy in order to bring on inflation; thus, you will have time to react prior to it being instituted if it does come our way. IOW, the money injected into the system will be hoarded by the banks, so it will be difficult to jumpstart inflation by bailing the banks. OTOH, if other countries stop buying our debt, and we decide to print disconnected money, all bets are off.

“The others are overly optimistic of the worth of their home- list high and keep dropping until they get a bite. It is hard to track since they keep listing under new MLS #ā€™s but some of these houses have dropped $100k or more.”

Houses over $700,000 are very difficult to sell becasue of tougher standards for new mortgages. Many sellers were forced to drop the price not because they overpriced their houses but because the demand is not there. This is why you would see some of these houses dropped $100,000 or more. Buyers are scare because they don’t want to catch falling knives.

Do you want to trust NWMLS?

I was curious about the same thing, so i built a tool that does this for 330 U.S. cities. It’s the “Median Home Price vs. Mortgage Rates vs. GDP Charting Tool” available at housingcorrection.com

If you don’t want to see GDP, uncheck the “Display GDP” checkbox before you submit the form.

You can mouse over any data point to get the exact mortgage rate or median house price. By default, I multiply the mortgage rates by 10 so they’re easier to see. So if you mouse over, move the decimal place in your head to get the correct mortgage rate reading. Otherwise, uncheck the “Multipy Mortgage Rates by 10″ checkbox to get the actual mortgage rate when you mouse over the data points.

I don’t see an answer to Joel’s question. I would expect Contingent sales to still be Active sales as they are in the mls and on public sites. Usually another buyer without a home sale contingency can bump the buyer who is “pending”, so it is considered Active.

There are currently 156 contingent sales in King County.

It looks like less than 15% of pending sales are short sales using the word “subject” as in subject to lienholder approval and “Short” as an agent remarks search. Unless you add the total of those two searches together, in which case short sales would represent 25% of pending sales.

I have also been watching 705. The houses that are priced “right” sell within two weeks. The others are overly optimistic of the worth of their home- list high and keep dropping until they get a bite. It is hard to track since they keep listing under new MLS #’s but some of these houses have dropped $100k or more. It is pretty interesting. Good luck with your search! Things are only getting better for buyers- so long as you can still get a loan!

You’d need to adjust for loan types and their market share, as well as down payments and underwriting standards in order to get a full picture of “purchase affordability”. Using interest rates alone the picture from the past few years would look like nonsense. Hardly any of the price movements were driven by rates on conforming loans.

Wait, maybe that is the correlation I was looking for.

Now is the time to reduce debt. I can’t believe anyone is dumb enough to take on more debt in this environment. However, I have been watching mortgage quotes provided by a broker who posts them and a significant percentage of these are cash out re-fis so it seems there are still a lot of idiots out there!

I believe the charts your looking for are here: King County Affordability: 1950-2007

I did. Refinanced my mortgage prepaying principal and decreasing interest rate to level where my mortgage payment + property taxes net of my tax shield is less than the rent I would pay to rent an equivalent place. FYI, rates have increased by 1% since my refinance.

It appears Halloween came early and they turned to “ghost town” bull dozed fields with no activity.

I hear from Roubini’s site that Paulson can give the banks billions to ease credit, but that doesn’t mean they won’t just hoard the booty and sink us deeper into depression.

with investments being decimated, higher lending standards finally biting down, and financial sentiment falling through the floor, it seems all but inevitable.

of those factors, I’d guess sentiment is the most important one – far fewer people will be willing to make the biggest financial decision of their life while being pummeled by daily record-breaking bad news and talk of depressions.

I don’t see how it can be a seller’s market when house prices are dropping. Is there any way to interpret this? Should we expect to see an upswing in housing prices in 705 and 710? Are the prices in those areas just being pulled down because of the ‘buyer’s market’ in surrounding areas? Or is it something more along the lines of what EconE is saying for downtown condo sales, that we really are not getting the full picture?

They are special!

But we all know how good they are at keeping condos off the MLS.

When the impact of the tightening of lending is apparent, prices will drop a lot, and listings will too (because anybody who absolutely does not *need* to sell will stop listing). But it does not take many sales to set the new price.

One of my neighbours is trying to sell at 2006 – 2007 prices. I will see how that works out. It is below FHA limits so maybe somebody will bite.