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Factors Affecting the Real Estate Market
Compared to home prices a couple of years ago, prices have dropped more than twenty percent. However, many analysts are suggesting that
the housing market will begin to see some improvement in 2009. Here are some of the things that continue to be a
drag on the housing market.
Recently it was announced that we have been in a recession since the end of 2007. It is now being said that the economy is still having trouble and
that unemployment rates will continue to rise. The GDP fell at an annual rate of five percent in the last quarter and is expected to continue its
decline in the next two quarters. These current declining numbers have not been seen since the early eighties.
Another factor is the one we can't seem to get away from these days and that is consumer confidence. If the housing market of the past couple of years hadn't
been enough to diminish consumer confidence, the current state of the economy has brought confidence to its knees. The latest numbers suggest that
consumer confidence has not been this low in nearly thirty years. Once people begin to worry about their jobs, investing in their future becomes the last thing on their minds and buying a home is no longer a priority, or even a reality. The latest forecast for unemployment claims that the unemployment rate will hit
nearly ten percent by the end of 2009. This will weigh heavily on the housing market if it turns out to be true. Less jobs mean less activity for housing; without
a job you cannot purchase a home.
A recent report suggested that one in seven homeowners in the United States owe more on their home than what it is worth. Even more alarming, for those who
purchased a home in the last five years, the numbers jumped to almost one in three homeowners who have negative equity. Rather than try to stick it out and continue
making payments, many troubled homeowners are simply walking away from their declining investment.
During 2008, banks were no strangers to deliquent loans and foreclosure. As deliquency has been on the rise, banks have been tightening their lending standards making
it hard to obtain a loan. New lending standards were not only affecting the people with bad credit, but also the banks were turning people away who in the
past had been considered to be well-qualified. In a recent survey by the Federal Reserve, it stated that approximately seventy percent of US banks have
increased their lending standards for prime mortgages.
One factor that has surprised many is that there are less households being formed these days. People are staying single longer and single people are moving in
with other single people. Some adults have even returned home to live with their folks. Immigration is also affecting the housing market because we have
less people coming in to the country these days.
One of the biggest factors in the housing market recovery process will be the decline in construction and the decline in foreclosures. There are still many construction
businesses that will need to go under before true progress can begin. At this time, there are no inventory concerns and adding to the market by building more
homes and condos is not the way to go. Foreclosures are expected to rise in 2009, but until these homes are sold, home prices will continue to be weighed down
by them.
Marin Real Estate Blog
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