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Real Estate Prices Diving and First Time Homebuyers Nowhere to be Seen

Real Estate Prices Diving and First Time Homebuyers Nowhere to be Seen

The spring home-selling season is underway, so why are real estate prices still falling and where are all of the first-time homebuyers?

In a nutshell, real estate prices continue to fall because of housing inventory, and tons of it! With the nation's biggest banks and mortgage lenders owning about 872,000 homes, twice as many as when the financial crisis began in 2007, there are oceans of houses on the market with low demand for them. Think back to your high school economy class and you'll see where this is going. The low demand is caused by several reasons such as the unemployment rate, the financial crisis, stricter borrowing guidelines, etc, etc.

On top of that, these banks and mortgage lenders are in the process of foreclosing on an additional one million homes and are positioned to foreclose on several million more in years to come.

According to Mark Zandi, chief economist of Moody's analytics, housing prices across the nation could fall by another 5 percent by the end of 2011.

On to the next question, if it's a buyer's market, all those first-time homebuyers should be making the move right? Well, only about 36 percent took advantage of these incredibly low prices in April. Last spring first time homebuyers made up nearly 50% of the market. Investors have been buying the majority of foreclosures with the goal to rehab and flip them. In April "45% of foreclosed properties were damaged and not inhabitable without renovation."

First-time homebuyers are looking at a lot of work when buying a foreclosed property and will likely need a loan that can help finance a home mortgage plus major repairs. There are home improvement loans out there such as the FHA 203k, but first time homebuyers are not taking advantage of these opportunities. If they did, and were more present in this distressed market, it would help to absorb the huge inventory.

Now that both questions are answered it begs to ask another of real estate prices: how low can you go?

How low will your payment be?