Just like a ride at an amusement park that slows down right before plunging to the steepest decline in the ride, our real estate market may be headed for a similar sudden decline following a small recovery of its 2008 declines.
With a drop of 10-15% anticipated, the coming price drop has been pushed by a combination of federal factors that are combining for the perfect storm in real estate.
After a 36 month departure from the peak of the real estate market, the topic of the day is still real estate and the current trend in prices. Despite the bad news, real estate appreciation was actually reported across the nation in 2009, but it is doubtful for 2010.
The first shoe to fall was last week's Federal Housing Authority announcement that it would tighten its loan standards in light of defaults that had pushed the agency's reserves well below its mandated level.
Due to the inundation of foreclosures, the FHA reduced the number of qualified buys by forcing those with the weakest credit to pay higher payments for mortgage insurance, increasing the required down payment and limiting seller contributed closing costs.
Conventional loan programs are having a hard time placing loans with qualified borrowers, who are turning to FHA financing for easier loans.
For a lot of people the FHA was their only resort, said economist Dean Baker, co-director of the Washington, D.C.-based Center for Economic Policy. With conventional loan sources completing fewer and fewer loans on a daily basis, the necessity for FHA loan programs is increasingly supporting and boosting our real estate market and our economy in general.
Without the lending that buyers use to acquire houses today, the real estate market would all but cease to grow, so you can see the vital service many banks offer our communities. As buyers absorb the home listings that are slowing down our market, we will have a recovery and protect our cash with real estate investments once again.
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