Few have emerged unscathed from the mortgage mess. But you’d think that if you were renting rather than owning that you could just duck and wait until things settle down, right? It depends. In some communities, high rates of foreclosure have turned so many former homeowners into renters that rents have been pushed up. To make things worse, good tenants have found themselves served with eviction notices when their landlords default on the property and a lender takes possession.

At the same time, lenders have tightened underwriting standards, requiring better credit scores, higher income, and larger down payments before granting mortgages. So those who might have become homeowners as home prices fell are finding that home ownership remains just out of reach. Finally, fear of making a homebuying mistake has kept a sizable portion of the population from buying — pushing rents up.

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The National Association of Realtors (NAR) reports that the median price of a single family home has fallen to $198,700. Real estate professionals estimate that there is approximately a 10 month supply of homes on the market. Lower home prices and a glut of available homes suggest a buyer’s market in many areas. This can provide homebuyers with more negotiating power.

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This week I came across an article written by San Francisco’s Carol Lloyd for the SFGate.com on the topic: “If housing prices drop 15 percent, what would it mean to you?”  Released in July of 2004, this article was written three and a half years ahead of it’s time. It takes a look at three very different profiles of potential buyers or sellers to see what the impact would be if housing prices dropped by 15 percent. This scenario did not occur after the article was written (prices are higher in the Bay Area now than they were three and a half years ago), but the article speaks words of wisdom to those of us who are still worried about the possibility of a drop of this magnitude.

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