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Housing Isn't Bottoming out. Cost – There may not be any increase in the real estate price/cost in the near future or even in the next few years. Instead, the cost may decrease in the next 2 to 4 quarters Price Reversion To The Average – Often when things or assets are priced higher than normal, the price not only tends to come down to the median, but it often plunges way below it. The same thing may be possible with housing prices-they may change back to the standard average. Unemployment - The unemployment rate may keep on increasing in the next few quarters. Consequently, it decreases the number of individuals or families, who can afford to buy homes. In addition, the salary or compensation has remained static in the last ten years. Hence, this further decreases the chances of families to invest in larger homes. Mortgage Foreclosures - A Loan Modification has not helped much in reducing the rate of defaulting mortgagers. There is a possibility that the rate of delinquent repayment, defaults, and foreclosures may not have reached the maximum. Once this rate starts increasing, it will force the real estate prices to fall even lower. List Of Available Houses – In real estate, a shadow inventory is often referred to the list of available homes, which have not been disclosed for sale in the market. Many banks, financial institutions, builders, and lenders have a list of properties that they have not disclosed in the market yet. This may further thwart the improvement of real estate prices for quite some time. Besides, the increase in mortgage foreclosures has resulted in almost 3 million additional homes that will be up for sale when the prices are right. Fear – Many factors in the past decade have contributed to the unwillingness on the part of potential buyers to invest big time in property. Since 2005-2006, the rate of property has decreased. Besides, the dotcom failure and the recession that hit the world in 2008 have further contributed to the total loss of 25 trillion dollars in the country. This has caused fear and panic among the homebuyers, who do not want to invest in something big. Credit Rating – Many Americans have low credit rating, high debt, and not enough money to make a down payment on property. To add to this, banks are making stringent rules about mortgage approval, which also include high credit rating and low debt rate. These further make buying houses much less easier for many. Cost Cutting – The result of the credit crunch has made many Americans cut down on expenses and to deleverage their balance sheets-it means they are trying to reduce the percentage of debt in their balance sheet, either by lowering expenses or by selling assets. Today, more Americans are investing wisely and are trying to avoid loans and debts. |
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