|
|
| Housing News Home Blog* US Housing Articles RSS Sitemap Add as a friend on Facebook Contact Us |
|
|
Reasons for housing market not rebounding. Excessive Supply – The number of vacant homes is nearly 10% as compared to an average of just 2.2%. Excessive supply of such ‘inventory’ with roughly 600,000 homes withheld by the banks worsens the problem and stops the recovery in a major way. Alt Loans & Interest Rates – 1.47 trillion dollars has already been worked out for loan resets. Now the Alt-A loan resets work out to a whooping amount of $2.5 trillion. During mid-2011, the first big wave is expected to hit whereas the peak may be reached only during the early 2013. Though there is enough time, the early statistics revealed does not boost confidence in any way. 20% of the Alt-A loans is already running late by 60 days as compared to an average of 3% of recorded during the last decade. Even with a modest rise in the interest rates in the next 2 years, payments may increase notably but the default rates will also rise. Hence, another massive wave of write-downs is slowly becoming visible. Foreclosure - The foreclosure problem is another huge obstacle. About 25% of the homeowners are still in deep financial crisis and the loan repayment problem is still too high. If we are able to break the statistics by loan type, 25% of prime loan borrowers, and 45% of Alt-A loan takers and 50% of subprime borrowers are in grave financial trouble. Added to this is the problem of recession which has resulted in huge unemployment. About 6.5 million Americans are without jobs and this would help any common man to predict where the foreclosures are heading! At this rate, foreclosures may reach 6.5 million by the year 2012! Hence, unless the employment situation improves, we may not see a fall in mortgage defaults. The situation may only worsen if the job market crashes further. On a highly positive note, unemployment may not reach it peak until early period of 2010, hence foreclosure rates may not really improve until this period either. In short, the real estate market runs with the supply and demand equation. With the rise in foreclosures and a dip in demand, the prices of the real estate market are expected to go down further. Compared to the peak prices of the real estate, there is already a huge dip of 34%. But due to the highly volatile nature of the supply demand chain, the prices may be expected to further crash down until we see a sign of recovery, which may be expected only by the year 2011. |
||||||||
|
|||||||||
