Home Loan Focus

Not counting Florida, the real estate crisis has been raging at its worst in California, Nevada and Phoenix, but last month the growing real estate and financial crisis which was proving very problematic for the rest of the country accelerated its correction in the north east. 

The index of pending home resales fell 7.7 percent after a 4.8 percent gain in December, the National Association of Realtors said today in Washington.

…..

A lack of credit and record foreclosures that are pushing property values even lower may keep prospective buyers out of the market for much of 2009.

Three of four regions dropped, led by a 13 percent slump in the Northeast and a 12 percent slide in the South. Pending sales increased 2.4 percent in the West.

Bloomberg

As you can tell from the numbers, the decline in January was more than the surprise gain in December, which indicates that the December gain reflected people cramming deals in before year end.  To average the 2 months together, we come up with 1.45 percent decrease both month or a net of 2.9 percent decline.

The decline is not the news.  The news is that the decrease is now being fueled by correction in the Northeast and the southeast.  Many homeowners around the country still feel that they live in pockets where the boom was not that big and the correction should therefore not be so big either.

The reality is that even in those areas where the boom was not that big, those areas might have experienced decreases had it not been for the boom at the time.  So the correction will likely bring slow growing areas down significantly just like it brought fast growing areas down significantly.  This is a bubble and the bubble does not care which part of the plastic on the bubble grew the most, when it pops the entire bubble is junk.

Ironically, the Northeast is one part of the country that will likely face tax increases in home heating taxes that will go to the federal government to pay for the bank bailouts and the bailout of local economies in California and Nevada, two states that won big in the Stimulus package.

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