Home prices continued their plunge during the last three months of 2007, setting a real estate trade group's record for the biggest-ever quarterly drop.Prices would not be dropping so quickly if it wasn't for the fact they were artificially high as a result of the subprime mortgage debacle and other mortgage products that allowed people to bite off more than they could chew.
The national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors (NAR), which has been compiling the report since 1979.
NAR officials blamed the liquidity squeeze that began last summer for much of the drop. Home buyers had trouble obtaining mortgage financing, especially for more expensive properties.
"The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges," said Lawrence Yun, NAR's chief economist, in a statement.
Fewer expensive homes were sold, bringing down median prices.
"California, south Florida, D.C., many of the high-cost markets are reflecting that," said Walter Molony, a spokesman for NAR.
Each of the four U.S. regions recorded losses compared with the fourth quarter of 2006. The West took the worst hit, at 8.7%. Prices dropped 4.8% in the Northeast, 5.4% in the South and 3.2% in the Midwest.
It was a catch-22. You really couldn't afford the house but you also could not afford not to buy the house because next year it would be even less affordable. Like any giant ponzi scheme the market eventually collapsed and took a whole lot of people with it. Our economy is a mess as a result of bad decisions on Wall St. and the endless desire for ever larger profits. The Federal Government will bail the companies out at taxpayer expense and leave the citizens twisting in the wind.
It has once again been proven that we must regulate the financial industry with strict standards. This idea that industry will police itself is utter bullshit and the proof is in the economic state we find ourselves in.