Property prices in USA may have to fall further

Whilst property prices in the USA have fallen over recent years, they may have to fall yet further before Americans start to buy again.  That’s the view of Douglas A. McIntyre, writing for 24/7 Wall Street.

More Americans believe that property prices will fall over the next year than believe they will rise, meaning the ‘stand-off between buyers and sellers is likely to continue for the foreseeable future.’

Low property prices not enough to entice buyers back into market

A recent poll showed that ‘many Americans also thought it was a good time to buy between 2003 and 2005, when housing prices were increasing and getting financing was relatively easy. Those attitudes began to change in 2006 as some home buyers began to realize a housing bubble was taking shape in local markets across the country.’

Low mortgage rates and low prices have yet to entice millions of American homebuyers back into the housing market.  As Macintyre says, “those who might buy a home are paranoid about the market’s future.”

In addition, many sellers cannot afford to reduce their asking price as many of them are in negative equity and cannot afford to repay the difference between their property’s selling price and the home loan that they owe.

Renting likely to increase

More and more Americans are choosing to rent property as they do not want to buy homes when employment prospects and property prices are uncertain.  The number of homeowners is likely to fall and the number of new properties built is likely to fall also.

However, Macintyre says that ‘it is too early to write off Americans as homeowners.’  However, he believes it will require property prices in America to reduce further before buyers come back to the market in significant numbers.