Housing Forecast, 2008 Expected to be Slow
Housing prices are going to have a hard time recovering according to a study out of the Harvard Joint Center for Housing Studies. While this is not a surprise for many of us, the study cites the removal of subprime loans and higher interest rates will keep many out of the housing market.
We all sit and worry about this, but when you have a bubble like we did in many parts of the country a stagnant period always follows. However, a huge decline in housing prices is not accompanying this slowdown as many predicted. The New York Times had an interesting article over the weekend discussing a foreclosure sale in California that had 1,200 people attend searching for cheap homes. The problem was that there were not many deals out there, the homes that sold were for near market prices when the auctioneers commission was included.
That is why the Harvard study is interesting. Yes, foreclosures are going to increase and there will be individual suffering as the marketplace resets. But the overall market will not fall out of bed.
“At a minimum it will slow any recovery,” said Nicolas P. Retsinas, director of Harvard’s Joint Center for Housing Studies, which issued the report. “Add to that the overbuilding and the inventory correction and you can see why it appears, particularly for the new-home market, that this slump will last well into 2008.”
Housing-industry analysts say the riskiest subprime adjustable-rate loans were made in 2005 and 2006. As they reset at higher interest rates through 2008, they are likely to fuel the current surge in foreclosures.
As lenders move to tighten loose credit standards and prevent defaults, it will become harder and harder for subprime borrowers to refinance into more affordable loans, Retsinas said. via SignOnSanDiego.com
Original post by Tom
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