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What Does the Future Hold For the Housing Market?
There is no one area of the country that has been left untouched
by the current crisis in the housing markets. Deflation has reached
epidemic proportions, extending into the double digits in some
areas. With California experiencing the highest deflation rates in
the country, this state is expecting to be the hardest hit and the
housing market in this state is expected to be the worst of any
other state. The unprecedented decrease in home prices in this state
is absolutely phenomenal.
The housing market in Miami, Florida, is currently experiencing
turbulent times. There are record high rates of foreclosures and the
mortgage market is very weak due to lenders tightening their lending
criteria. These factors have led to home values falling at an
alarming rate. For the past two years, Miami has experienced the
worst of the housing market in the current recession. Just a few
years ago, there was a condo boom in this city which led to massive
problems in the industry and eventually spiralled out of control
bringing about a massive bust in real estate.
Florida and California are two of the easiest states for the
prediction of where the housing market is headed. They were the
first markets to crumble when the real estate industry started to
encounter difficulties in 2007. Predictions for the market in other
areas of the country, however, are more difficult to predict because
they are just on the edge of falling house prices. In Florida and
California, house prices escalated at such a fast pace that it was
only a matter of time before the market came crashing down around
investors and home buyers.
The real estate market in other regions did not experience the
rapid boom that occurred in Florida and California and therefore
have not experienced the drastic drop in the market. Some examples
of these regions are the housing markets of Massachusetts, Indiana,
Nevada and Arizona. However, house prices are declining in these
states and due to the economy, which is seeing massive numbers of
lay-offs and business closures, the list of foreclosures on the
market is also increasing. Michigan has seen the most layoffs due to
the downturn in the automotive industry and it is here that the
economy is playing a very significant role in the condition of the
real estate market.
In the coming months adjustable mortgage rates are set to adjust
on several million mortgage loans all over the country. It is a real
possibility that when this happens there will be a sizeable number
of homeowners who will find themselves in a financial position where
they are unable to make their monthly payments. One of two things
could occur in this situation – they could put their home on the
market for the amount of the outstanding balance of the mortgage or
they could resign themselves to the fact that they are unable to pay
and allow the account to deteriorate to the point where the lender
has no option but to foreclose. The problem with trying to sell the
home is that it is very likely that the value of the home on today’s
market is far less than the amount still owing on the mortgage and
this means they won’t have any luck with a sale.
2009 is not expected to result in any improvement in the housing
market and a quick rebound is very unlikely. According to statistics
home values are continuing to drop at an alarming rate and even new
homes could experience a drop in value of 18% or more throughout the
year. While there are indications that the housing market is
starting to show signs of levelling off, experts warn that
homeowners should not expect it to rebound to the point where it was
in 2007. There is no doubt that the market will rebound, but it will
be very slow.
There is still room for optimism, though, in the housing market.
There are fewer sub-prime mortgages on the market today due to quick
sales and foreclosures and a possible stimulus package is expected
to bring some relief for the housing market. Although first-time
home buyers have been forced out of the market due to the lending
restrictions, they will soon start to see signs of a recovery in
this area.
Many homeowners who are managing to maintain their mortgage
payments are not venturing into the real estate market because they
fear they will lose the equity they have built up in their homes due
to the falling house values. However, they may have to hold on to
their homes for a very long time if they expect to get the high
prices of a few years ago. While the market will undoubtedly
rebound, there is little chance that the prices will reach these
high levels very soon.
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