Thu, 22 Jan 2009

The housing market has been in the news over the past few years. After the year 2000, the housing market began to explode. Prices went sky high, people were able to tap the equity in their homes for other purposes, and people were able to sell their homes, often at a significant profit..

People were able to continue to afford these higher prices with non-traditional mortgages, such as interest only loans and mortgages that required little or no money down, in addition to not verifying one’s income or credit score, which is an indicator on weather one can repay their loan or not. Also, speculators were driving the housing market even more out of control in certain parts of the country, such as California, Las Vegas, Florida, and other pockets around the country.

As 2007 and 2008 came, things began to change in the housing market in a major way.

Consumers, who were feeling the effects of higher gas prices, job losses, and an overall weakening of the economy, were taking it hard. As a result, an increasing number of people were unable to make these large mortgage payments that they had as a result of the housing bubble. When lenders and banks began to realise the number of foreclosures, they tightened up standards for getting a loan in a prolific way. You had to have excellent credit and money down, which was a change from just a couple of years ago. As a result of these changes, the prices on homes began to fall in a sharp and significant way, further pinching consumers that were used to home equity loans.

The market had totally changed.

Today, the market is out of reach for many Americans, but not because of the price of a home. In fact, home affordability now is better than it has been in many years. But only consumers with excellent credit are getting loans. Sub prime shoppers right now are unable to get loans. Banks are scared to lend money, because they have lost so much because of foreclosures and now repossession and sell and rent back agreements are rife within the industry - adding yet more instability to the already toppling US crisis. However, there is good news, as cash buyers and shoppers with excellent credit can get into a home for a bargain, positioning themselves for a big payday when the housing market comes back and prices return to more normal levels.