According to this data, average home prices fell 2.8 percent in January, faster than the 2.6 percent drop recorded in December. Overall, the most recent home-price index reports that home values in 20 cities fell by an average of 19 percent over the past year.
However, new mortgage applications are continuing to climb as first-time home buyers are taking advantage of home prices that have fallen to historic lows. The interest rate on a 30-year fixed rate has fallen below 5 percent, in part as result of the Federal Reserve’s entry into the mortgage market as a buyer of home-loan securities.
However, many economists are confident that this downward trend is necessary for prices to bottom out and will help stabilize the housing market in the coming year.
Michael Darda, chief economist at MKM Partners, said:
"The home price bubble has essentially vanished. This is a powerful combination that we believe will create a bottom in the housing market in 2009."
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