Realtors: National, Florida Home Prices Will Decline in 2007

Amid new signs that the housing slump is worsening, U.S. Senate Democrats said Wednesday that hundreds of millions of dollars of new federal aid may be needed to assist homeowners at risk of foreclosure.

“We will be proposing significant amounts of dollars,” New York Democrat Charles Schumer told reporters after being asked if a large, federal bailout may be needed.

Across town, meanwhile, an activist non-profit group from Boston called on Wall Street to help homeowners restructure their mortgage loans.

“We’ve heard one heartbreaking story after another of borrowers with limited incomes being sold mortgages they could not afford,” Sen. Sherrod Brown (D-Ohio) said at a briefing on Capitol Hill.

His words were backed up by the realty group’s prediction of a 0.7 percent decline to $220,300 this year in the median sale price for existing homes, down from $221,900 last year.

Tighter lending standards and the continued fallout from troubled market for Florida mortgage products given to people with shaky credit are to blame, some experts have said.

• Existing home prices in Bradenton-Sarasota started to slip following the slump in sales that began in late 2005.
• National headlines went from declaring Bradenton and Sarasota housing market the fastest appreciating market to referring to it as one of the country’s most overvalued markets.

The latest numbers released by the Florida Association of Realtors showed median prices in Bradenton-Sarasota sliding about 9 percent from last year - even as Florida mortgage loan rates have remained low - while median condo prices skyrocketed 40 percent over last February’s.

The NAR also revised downward its estimate of sales this year of existing homes to a decline of 2.2 percent, compared to an earlier forecast of a 0.9 percent decline. New home sales are expected to fall 14.2 percent compared to a previous estimate of a 10.4 percent slide.

Economist Edward Leamer, director of the University of California, Los Angeles’ Anderson Forecast, says that estimate is too conservative.

He predicts predicts a decline in the price of existing homes of between 2-3 this year and expects that trend to continue for 2-3 more years.

The reason: With high-interest rate Florida mortgages for people with poor credit no longer available, lenders may be eliminating 20-30 percent of the demand for homes.

With 1.8 million adjustable rate mortgages resetting to higher rates this year and next, foreclosures are sure to continue rising, a 32-page report from the Joint Economic Committee said.

The Federal Housing Administration needs to be revamped to bolster mortgage refinancing for those danger of default, the JEC’s report said, citing a proposal by a Harvard professor under which the housing agency could oversee a “rescue fund” that would restructure failed or failing mortgages.

Aid could also be provided to community organizations or banks that work with borrowers to refinance Florida home loans.

So far, the escalating condo prices didn’t seem to have an effect on sales, which were up 31 percent and single family home sales were up 5 percent in the region. The Bradenton-Sarasota market outperformed every other Florida market except one, Panama City.

Statewide, Florida home prices slid but experts claimed this is the last month they think median prices will show a decline.

SOURCE: Bradenton Herald