Housing Slump May Effect Future Mortgage Lending
Experts are beginning to agree that the housing slump which began in the latter part of 2005 will most likely continue for at least another year. During this time, the average value of American homes will decrease. Some believe that the decrease in home values will be the largest since the World War 2 era.
One major issue with a falling housing market is that it tends to drag down other markets as well. It is something of a dog chasing its own tail model and some economists believe that the downward spiral has a long way to go before it begins to turn around.
Mark Zandi of Moody’s Economy.com recently stated: “I think the housing market has got another year of very weak sales, falling construction and lower home prices. And all of that assumes that the economy holds together reasonably well and we don’t have a recession.”
What this means to the consumers who are looking to buy homes in the near term is that mortgage financing problems will grow as more home loan defaults become evident. Banks and other credit institutions will have no other choice but to tighten up credit and extend credit to only the most deserving.
The Joint Economic Committee estimates there will be 1.3 million foreclosures from mid-2007 through 2009 in sub-prime mortgages. That is a lot of inventory that will be hitting the real estate market. But there is a rainbow in this storm.
For those individuals and families with good credit and reliable employment more home inventory on the market can mean much lower home prices. In some areas of the country, the savings can be dramatic. In fact, this might be one of the best times in over a decade to buy a home.
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