Many experts in the housing market field are warning against over optimism following end of year reports in regards to a recovery. Indeed, many expect a decline in prices and fluidity throughout 2010, and there are key indications to suggest these fears to be warranted.
The signs are there for everybody to see, and while recoveries have been made, these point to issues in the immediate future. Heading up the list of issues are an increase in foreclosures; but there are also concerns in regards to heightened interest rates and the cessation of tax credits.
The first blow that will see foreclosures rise is the relative failure of mortgage modification programs. Though initially positive, troubled borrowers are again starting to default; at a worrying level.
There is also the problem with ARMs (adjustable rate mortgages), which are set to transfer over to fully amortizing mortgages. This will invoke higher monthly payments; thus defaulting levels will rise again.
Even in the solid structure of fixed rate mortgages, there are rumored to be problems in the pipeline. Though the market stabilized somewhat, house prices are still not at a level commensurate to the price paid. People are defaulting as a result and more are likely to follow.
The housing market will also be affected by constantly rising interest rates, and a greater impact will be felt from this, above all else perhaps. This will be impacted in a large way by Federal support being cut back in March.
Another Federal hit will come in April; as tax credits end. Initially, this was a successful initiative, but the impact of its withdrawal is likely to be severe. Again new buyers, always the lifeblood of a burgeoning housing market, will be hit hard.
This in itself may have somewhat of a silver lining however; as purchase rates are likely to increase in the short term to meet the deadline. It is not all doom perhaps; forecasters have not performed well throughout the whole financial downturn after all. But it is certainly going to be an interesting housing market moving forward.
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categories: housing market,real estate
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