U.S. to see first crash in home prices in 38 years; predicts National Association of Realtors

For the first time in 38 years, the U.S. home prices are crashing due to the cooling of the subprime mortgage industry, according to the National Association of Realtors. As per the real estate trade group forecast, the median home prices are likely to go 0.7 percent down this year. However, Indianapolis could see a slight rise in average prices this year.

It would be the first year-to-year drop if the decline in prices takes place on a national scale. The group has been tracking the prices since 1968. It is believed that it will be the first decline since the great depression. Boosted by inflation, the prices of median homes have been rising since a long time, thus the drop would be a relief. The median price of a U.S. home rose by 1 percent last year. The main reason attributed to this decline is the derailing of the subprime lenders. Irvine, a California based New Century Financial Corp., which was also the largest independent subprime lender, filed for bankruptcy on April 2.

Due to fewer sales in the high-cost markets, the national median price is now directly influenced by lower-cost markets. The sales are also being predicted to see a decline this year. The association forecasts that the sale of newly built houses will decline by 16 percent, while the existing-home sales will see the crash to 2 percent.

Source: Indystar