You may not like roller coaster rides but may find yourself on one nonetheless, if you are a home owner because real estate is set to drop this year after recovering some of its 2008 gains.
A trio of gathering government storm clouds will be responsible for the drop that some predict could mean another 10% to 15% slump in prices, they say.
Here it is three years after the peak and it\’s still all about housing, said David Rosenberg, an economist at Gluskin Sheff & Associates in Toronto. The outlook for the market is extremely clouded.
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.
Using the huge number of loan defaults, the FHA reasoned that raising the required down payment for buyers with the lowest credit, increased the PMI premiums for its loans, and reduced the amount of seller pre-paids and closing costs allowed.
As people experience credit difficulties and cannot present high enough scores to qualify for conventional programs, more people are turning to FHA backed loans for assistance.
Due to these trends many borrowers are considering the FHA as their only source available for financing their home purchases, which means the government will be backing even more loans than the already burdened Fannie Mae and Freddie Mac do. A lot of people who can\’t get loans from the FHA will have nowhere else to turn.
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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