Foreclosure Effect: Home Prices Crash to 1999 Levels

The real estate industry in the US is in a mess. As people lose jobs they are faltering on mortgage payments. Hence, foreclosures have become common. The prices of foreclosed properties have dipped over time. What’s amazing in some regions prices have gone down to the 1999 level.

People buy homes with the notion that the prices would increase over time. But in the US exactly the opposite is happening. The home values are depreciating over time.

There are nine ZIP codes in Palm Beach and Broward counties that had lower average sales price than they did in 1999. This was revealed by San Diego-based research firm, MDA DataQuick.

Michael Keigans lives in the ZIP code of 33441. The median price was only 6 per cent off what it was in 1999. He says that people buy homes with the hope that the property values will appreciate. This way the homes can be sold and the net worth can be built upon. However, there are no such guarantees.

It may be noted that a decade ago people who bought homes in the Hallandale Beach ZIP code of 33023, they paid around $120,000. These homes now carry a price tag of $100,000. That means the long-time owners are not going to benefit from the fact that they have held on to their investments. In the ZIP code of 33444, the median price was $136,000 a decade ago. Now the sales price is $81,500. That means there has been a 40 per cent decrease.

Although prices have seen a decline in some major counties in South Florida, in 90 per cent of them, prices are higher than what they were 10 years ago. The problem in these ZIP codes is that people in the low income group live here. They had taken sub-prime loans and naturally they defaulted on the mortgage payments when the housing industry crashed. An analyst with Metrostudy in West Palm Beach, Brad Hunter says that many people with who do not have good credit history are residents of the region.

Hunter says that many people were induced to buy homes that could not afford. Hence, they defaulted on mortgage payments. That led to foreclosures which brought down the property prices of the homes in the neighborhood. People who bought homes in the nine ZIP codes are now running up a loss. There are some big winners and losers in the game.

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