Home > Mortgages > Will Home Prices Keep Dropping?

Comments 0 Comments
Advertiser Disclosure


Home sales and prices have been on a seven-week slide, most of which can be attributed to seasonal market changes. But the economic uncertainty that came with recent government shutdown and debt-ceiling debate contributed to the sharp decline in sales volume and, with the winter months approaching, home prices and sales volume are not likely to pick up now that the government has reopened.

“I would say that the overwhelming weight of it has to do with the fact that it’s seasonal, that the home-buying frenzy pretty much starts in April and it dies down in September,” said Scott Sheldon, a senior loan officer at Sonoma County Mortgages in California and a Credit.com contributor. “The shutdown certainly didn’t help.”

DataQuick updates home sales volume and prices for the previous 30 days of home sales every Thursday, and the data encompasses sales in 98 of the top 100 metropolitan statistical areas. The most recent update shows a 1.3% decline in sales volume and a 1.6% decline in median sales price just this week.

While each week’s numbers were up year-over-year from 2012, the yearly gains declined. The Sept. 19 report showed 16.6% growth from 2012 in sales volume and 14.3% growth in median sales price, while Oct. 24 posted 14.1% sales growth and 10.8% price growth.

The conclusion of the standoff in Washington coincided with the start of the slower home sales season, so Sheldon expects sales and prices to level off.

Changes to the qualified mortgage standards could interrupt the seasonal cycles in real estate. Starting Jan. 10, 2014, the debt-to-income ratio needed to attain a qualified mortgage will be 43%, meaning homebuyers may have to pay for more expensive non-qualified mortgages. Whether consumers anticipate the impact of this change remains to be seen.

For potential homebuyers with high debt loads, the final months of the year could be an opportunity to score a home. While the market is still incredibly competitive, the seasonal decline could make it easier to find a home while decent interest rates are available and current qualified mortgage standards are in place. On Tuesday, 30-year fixed mortgage rates fell to 3.98%, the first they have been lower than 4%  since June, according to Zillow Mortgage Rate Ticker.

Knowing when to shop and if you’re prepared to buy a home requires a bit of research. House hunters need to know how they’ll look to lenders, so assessing your finances and analyzing your credit profile is a crucial component of home-buying preparation. It’s easy to look into your credit history, with the availability of a free annual credit report, as well as online resources like the free Credit.com Credit Report Card.

Sheldon said those considering buying a home in the coming months should make necessary improvements to their finances, such as lowering their debt-to-income ratio by paying off credit card debt.

“Get out there and be aggressive in the market. Don’t get me wrong, there’s still competition, but there’s a lot less,” Sheldon said. “Especially if you have a high debt-to-income ratio, you’re going to be paying a lot more for the same house in January.”

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team