Real Estate: Why Home Prices Won’t Bottom Out

Watching the U.S. home market struggle to rebound is like listening to children in the back of a car. No, we’re not there yet.

The National Association of
Realtors reported that ten real estate markets are “leading the nation
toward a general recovery and stability of the housing sector,” but
myriad problems are going to weigh down the housing market for months to
come.

The lingering malaise in the
economy has triggered a new wave of defaults and foreclosures. After
five straight quarterly drops, foreclosures nationwide shot up 14
percent from the second to third quarter this year, according to data
released by Realtytrac, the foreclosure information service, in October.

While
RealtyTrac doesn’t foresee that the latest foreclosure wave will equal
the severity of the 2007-2010 pattern — in which three million
borrowers lost their homes — it’s going to slam on the brakes where
areas are getting hit the hardest.

In theory, it should be a good time to buy a home. In the worst-hit areas, properties have lost more than half their value.

Yet
as the average 30-year mortgage rate has slipped below 4 percent, the
combination of employment insecurity and unusually tight standards for
lending are discouraging buyers en masse. Lenders are asking for
extensive income verification and tax returns. One lender I contacted
for refinancing even wanted me to get an accountant to certify that I
wasn’t lying to the IRS.

Here are some of the biggest roadblocks:

–Even
in bruised cities where price appreciation is evident, unemployment is
still too high. Six out of 10 of the “top turnaround towns” listed by
Realtor.com for the third quarter had jobless rates above 10 percent. People can’t
buy homes if they’re not working or soon to lose their jobs. Those
cities, which include four of the largest cities in Florida, still have a
long way to go to recover from the housing bust.

–Although
at a record low, the home mortgage rate may still be high relative to
home prices. This may sound counterintuitive, but research from the
Leuthold Group in their November newsletter shows that a “real” mortgage
rate — which factors in the falling market value of the home prices –
is 8 percent. Leuthold says that real cost of buying must include the 4
percent interest rate and the 3.9 percent average home prices decline
over the past 12 months. That cost is still scaring away buyers.

–The
combination of unemployment, high housing inventory and foreclosures is
hurting places where there wasn’t an excessive price run-up.
Realtor.com found that the largest year-over year median listing price
decreases through October were in cities like Chicago, Detroit and
Atlanta. This three-punch combination will continue to ravage markets
where there’s a sluggish economy

Possible solutions to the housing blockage range from the radical to the necessary. A group called Remortgage America is calling for the government to loan Americans mortgages at 1 percent to finance a new or existing residence.

Others
would like to see Fannie Mae and Freddie Mac take the foreclosed homes
they own and either auction them off or offer them in a huge fire sale.

The
seized mortgage agencies account for up to one-third of foreclosed
homes — about 250,000. American taxpayers are pouring tens of billions
into propping up these two wards of the state, which were taken over by
the U.S. Treasury in late 2008. The Obama Administration has yet to
announce what it wants to do with the companies. Will they be
restructured, liquidated or privatized?

A
third option, which may have the least impact on a battered market, is
to offer foreclosed homes in rent-to-own deals. Prospective homeowners
get a place to live under reasonable leases and can build equity toward a
purchase.

It’s estimated that
some 3.4 million foreclosed homes will be on the books of banks and
mortgage companies by the end of this year. As regulators, banks,
mortgage companies and state attorneys general move sheepishly to
unblock mortgage modifications, refinancings and resales, only one
certainty prevails: The open market will not be able to properly price
every property until all government restrictions are lifted on their
sales and re-financing.

GD Star Rating
loading...

From: http://us.rd.yahoo.com/finance/news/rss/story/*http://us.rd.yahoo.com/finance/news/topfinstories/*http://finance.yahoo.com/news/real-estate--why-home-prices-won-t-bottom-out.html?l=1

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Shopping Cart

There are no items in your cart.

Our Products

  • Credit Repair Guide

    120px-Credit-cards
    There are many misconceptions about credit scores out there. There are customers who believe that they don’t have a credit score and many customers who think that their credit scores just don’t really matter. These sorts of misconceptions can hurt your chances at some jobs, at good interest rates, and even your chances of getting More Info »
    $2.00$1.00
  • Do-It-Yourself Loan Modification Software Kit

    product_img_1_128x128
    The loan modification software guides the you the homeowner to the necessary calculations and forms that the banks are looking for, they are done for you instantly. You simply enter your information and the software does the rest. The software also integrates the new Obama home rescue program designed to give you homeowners a better More Info »
    $29.99$10.00
  • Free Short Sale e-Book

    Image_shortsale_book
    WARNING: Do not list your home as a Short Sale until you have read this totally FREE report. This eBook can help you to buy another home in as little as 12 months!
    $0.00
  • Lender Forms

    lender-forms
    An assorted collection of lender forms.
    $0.00

Categories

Archives

Advertisement

Call Now: 877-239-1878

Advertisement

Call Now: 877-239-1878