Consumers worry about the future of the real estate market. Their fears seem to be justified based on the current economy and the way real estate prices are trending.
Homeowners’ pessimism reached new highs in the latest polls by the Associated Press. Homeowners are concerned about their ability to pay their mortgage and only 11 percent of the people polled said they were considering buying a home soon. The economic climate, combined with the current dismal state of the real estate industry has made consumers very weary of the buying a home right now.
Mortgage Worries
Adjustable Rate Mortgages strike fear into the hearts of many current homeowners. Despite the record low interest rates, many homeowners with teaser rates will still be likely to see some kind of increase. Additionally, with the prospect of inflation on the horizon, borrowers have to wonder how long interest rates can remain this low. This puts many between a rock and a hard place, as real estate values continue to decline making refinancing a less and less likely exit option.
Banks secretly appreciate this respite from lending; however, as they lick their wounds from the Alt-A/Subprime crisis. Adding to the headache of many consumers, banks have increased their fees and lending standards. It is becoming much harder to obtain a loan or even refinance a home with equity. Banks now have more concern with where real estate prices are headed than they do with the current state of the market. After being burned by real estate depreciation, a term relatively unheard of in the past decade, all banks have changed their underwriting standards. This means even homeowners with equity may not be able to tap their home's value if they live in areas expected to depreciate.
Real Estate Market Outlook
Unfortunately for many buyers and sellers, the real estate market looks to be slowing to a crawl. Inventory levels continue to remain high as the median price falls like a rock. For residents of Florida and California, the pace of price decline seems to be quickening. Many homeowners who were waiting a few months to list their homes when prices stabilized now face a market that is 10-20% lower priced than it would have been originally.
Right now the markets are all gloom and doom, but patience is always a virtue. If a buyer can afford to buy now, the world is their oyster. Buyers should secure a mortgage before they begin their housing search and ensure that they are banking with a reputable company. Once they secure the loan, bid low and hold ground. Regardless of what anyone says, this could be one of the greatest buyer's markets the real estate market sees in 10 or 20 years. Of course, only the people who can obtain mortgages will see any benefit.
