• 25
  • May
    2011

As of February 2011, home prices that were expected to rebound have in fact sunk 3.3 percent putting February sales at barely above the historical lows of April 2009.

The Case-Shiller home price index, compiled by Standard and Poor's, tracks the value of real estate in areas across the country by collecting data each month on sales of single-family houses. The S&P/Case-Shiller index reports home values down 32 percent from their peak in 2006. According to David Blitzer, spokesman for S&P, the trend is expected to continue.

The downward spiral of home prices came in two stages. After the spring 2006 high point, a period of three years of uninterrupted declines was recorded. Then, a 13-month increase with a 5 percent gain gave the market a false sense of hope until the rebound ended in June. Losses have been recorded every month since then and the market is edging toward a new low, being referred to as a double-dip.

Declining home prices, unfortunately, lead to more foreclosures. Price drops mean houses may be worth substantially less than what the homeowners now owe on them, a phenomenon homeowners refer to as an underwater mortgage, which in turn leads to more foreclosures by lenders.

Underwater borrowers have no home equity and no source of credit to tap into, should some type of financial disaster strike. This also cuts off refinancing options, because banks won't approve loans for homes without equity.

The hope is that conditions will improve when the economy begins to recover and job growth improves. Some people may not be able to wait that long if they are underwater in their mortgage loan or in danger of losing their house to foreclosure.

If you are unable to make your payments, it is important to consider your options. While the temptation may be to take the phone off the hook and throw the collection letters in the garbage, there may be options available that will help you save your house, like a special forbearance or loan modification.

There also may be opportunities available if you can't afford to keep the house but don't want a foreclosure on your record, such as a short sale or what's known as a deed-in-lieu of foreclosure.

Ultimately, if your house has lost value and you are having trouble making payments and are at risk of a possible foreclosure, you need to evaluate whether you can afford to continue making your payments until the market improves, or if it is time to consider other alternatives. Speaking with an experienced attorney may help you decide which route is the best for you and your circumstances.

Source: http://money.cnn.com/2011/04/26/real_estate/february_case_shiller/index.htm