What's Happening in the Housing Industry
Currently, the housing industry resembles a rollercoaster with mortgage lenders busy refinancing mortgage loans, mortgage loan rates at a historic low and housing more affordable than ever but at the same time more difficult to purchase due to problems in obtaining home mortgages.
For buyers with an excellent credit score and a significant down payment, this is an auspicious time to purchase. Housing affordability is now at its highest rate in the last twenty years. This does vary by region throughout the United States. Generally speaking the most affordable markets are in the Midwest with California and New York the least affordable.
The good news is that economists expect the present housing crisis to end this year. They base their predictions on the fact that large investors are buying homes but, in order to close the deals faster, they are paying cash instead of arranging mortgage loans. Since these investors buy for the purpose of reselling for a profit, their buying activity is supposed to be an indication that housing has reached bottom prices and will now start to move upward.
But there is another factor that those thinking of buying should consider and that is time. While the market may turnaround and begin to move up, this will be a slow gain. Economists don't foresee the rapid upward swings that have happened in the past. So anyone planning to take advantage of the current market should also be prepared to remain in the house for ten years or more. If this isn't practical, than a buyer should be certain to have enough equity in the house that it can be rented for the amount of the monthly mortgage loan payment.
What is not so wonderful for prospective home buyers is the possibility that regulations for granting mortgage loans may change requiring home buyers to make a down payment of twenty percent of the purchase price in order to buy a home.
Previously and currently, homes could be purchased with little or no down payment and a second and private mortgage would be obtained to make up the buyer's down payment. As a result when the economy soured and people started losing their jobs they were unable to make their house payments. And because they had so little equity in their houses, they could not sell them for the amount that was owed against their combined mortgage loan. And they couldn't rent for the amount of their monthly mortgage loan payment. So their houses went into foreclosure.
Some industry leaders believe that a legal requirement for a twenty percent down payment would alleviate this problem and prevent a future occurrence of the present housing crisis. However, others are saying that this would also make a home less available to a large percentage of the American public. At this point, it is difficult to predict the results but prospective home buyers do need to be prepared for this possibility.
While the time is right to buy, buyers need to be cautious and ensure they are financially able to meet their mortgage loan payments now and in the future. They also need to be certain that in case of financial emergencies the mortgage loan is so constructed that the house can be rented to cover the monthly mortgage loan payment.
