Falling House Prices mean Lower Insurance Costs?

According to a recent government report, US home prices took another turn for the worst in the second quarter of 2008, sending the average home value back to 2005 levels. Even though prices actually rose in the majority of states, areas in Arizona, California, Florida, and Nevada have more foreclosures than they can handle, dramatically bringing down national averages. Many areas in those states have seen home prices decline over 25% in the past several years. Although plummeting home prices are never a good sign of the housing market, one possible positive to come out of all this could be lower home insurance costs. One of the main factors in determining house insurance is the home's value – the lesser the value, the lesser the insurance costs. It's yet to be seen how much insurance costs will really be affected, but some people could see some decent savings. While home prices have risen in some areas and there has been a frenzied amount of sales in certain places, the home market appears to still be years away from righting the ship.

Housing Market Still in Trouble

Despite some increases in house prices, the housing market's worst slump in years is far from over. In fact, many analysts believe it hasn't even reached rock bottom yet and the worst is still yet to come. Generally, most believe the market won't completely turn around until sometime in 2010.Here's a look at some of the important economic factors indicating that the market is still slumping.

• One major indicator that the housing market is still struggling is the percentage of new home sales. Though sales actually rose 2.4% from last quarter, they're down dramatically from 2007.
• Another ominous sign for the market – an ever increasing amount of foreclosures, notices of default, and bank repossessions. It's estimated that one out of every 465 home received a foreclosure notice in July of 2008.
• There seems to be a large oversupply of new homes in many markets as well. These back up their local markets, meaning fewer new homes are being built before their sold off. All of these new homes would take nearly a year to completely sell off, as opposed to the six months the market shoots for.
• Finally, areas in California, Nevada, and Arizona are so overbuilt that they're causing the prices of existing homes and refinances to drop too. It's also affected homebuilder confidence, which is currently very low.

Additional Resources

• Insurance may See Ike's Surge
• Foreclosure Effect on Home Prices may be Small