The Housing Market Shows Signs of Recovery or Does It?
Finally, after a debilitating plunge the housing market is showing signs of a recovery. Statistics show that home sale prices have steadily rose for the last few months but that rosy picture is still tainted from the on-going foreclosures and layoffs. Home buyers have mega incentives at their disposal to purchase new and resale homes and many have taken the opportunity to breathe life into the housing market but we are not out of the woods just yet.
According to the Case-Shiller Price Index, compiled by Standard & Poor, July had an outstanding increase of 7.2 percent in home sales which accounted for the largest jump in the last ten years. It makes you want to breathe a sigh of relief and the increased numbers show improvement but let’s really take a closer look at this recovery before bringing out the balloons and party favors.
A third of the recent increase in home sales is first-time home buyers taking advantage of the federal tax incentives and these first time home buyer tax incentives end in November. Another third are on account of foreclosures that unfortunately will not end anytime soon.
While the country is becoming excited about the recent influx of home sales the Case-Shiller national housing report explains this surge of home sales; Looks like the lower the price tag the higher the sales and homes selling for over $250,000 are still down.
Prospects for a full recovery look good but slow coming; more foreclosures are on the horizon. Sub-prime creative loans were all the rage in the mid-2000’s and the focus was on interest-only payments but the time is quickly coming for those payments towards the principal with ballooned interest rates. Are homeowners ready for this? Not all of them. Could this mean a new wave of foreclosures? Yes!
Interest-only creative sub-prime loans were a resourceful way of buying more than you needed and more than you could afford. Home buyers could purchase a home and pay the interest while delaying any payments towards the principal for several years. However; not only are those principal payments coming due but now the payments will increase double and triple the amount. While homeowners were certain their salaries would have increased and career goals had been met, during this downturn in our economy most have been sadly disappointed.
So we’re looking at this surge of home sales as the beginning of a recovery but the tax credit will be eliminated in the next two months and we’re still facing layoffs and foreclosures…it’s too soon to call it but for homeowners looking to buy, it’s still advantageous to get a new home now.
