For those who currently own or looking to purchase a home, which is usually the largest investment made in one's life, your decision now could affect the rest of your life’s. Please proceed with caution. The are times to gamble, but your life is not a roulette wheel and with so much volatility and instability in the housing market, it's probably best to play is safe and sit on the sidelines (if you are looking). But for those in this jam, don't just cross your fingers and hope for a quick turn around. Although possible, the odds are small. If your budget does not allow for your current mortgage payment and your savings are running down. Protect yourselves from a possible disaster and sell your home. Forget the possible upside...you must protect you and your family from the potential nightmare of losing your home and ruining your credit.
I sold two homes, one in 2006 and one in 2005 and did not buy. People thought I was loony. There were realtors, friends and family who told me how this market will continue to rise and that I'll be throwing away money if I didn't buy another house. Others told me that our San Francisco Bay Area real estate market will NOT go down...can "never" go down?!?!? When I started seeing the unbridled frenzied in the market and hearing all this from just about everyone, I thought it safe to cash in my chips.
Now there is talk of a turn around. Do weight those who intest are not alighed with yours greater that your own self interest. You know your own financial situation. It should be basis on facts, not hopes. If you are stuggling...then I urge you to exit this market and save what you can...even if it's just your credit. Good luck!
Harry
By Mark Trumbull Staff writer of The Christian Science Monitor
from the December 10, 2007 edition
Housing: a crisis with staying power
Americans just witnessed the biggest housing boom in their history. The impact of the bust that has followed looks to be wide and long-lasting. First of a three-part series.
Cape Coral, Fla. - The current deflation of home prices is changing America.
It's a real estate storm that made landfall like a slow-moving Gulf Coast hurricane here in south Florida and in other once-booming housing markets last year. In recent months it has gathered momentum and spread, shaping up to become perhaps the worst home-price slump since the 1920s and '30s.
The bust promises to have lasting effects. Among them:
•It is defining the limits, for now, of what President Bush has called the "ownership society." A surging foreclosure rate means that the rate of homeownership, after a historic rise, is falling.
•It's forcing a rethink of economic policy. The Federal Reserve is expected to ease interest rates this Tuesday. Over the longer term, today's hard lessons might influence the way the Fed and the mortgage market operate.
•It affects the mood of America entering the year of an up-for-grabs presidential election.
•It marks a pocketbook shift for consumers – and perhaps even global investors – from an era of housing-fueled wealth to belt-tightening. Real estate can no longer be viewed as a surefire investment.
"We are in the aftermath of the biggest housing boom in history," says Robert Shiller, a Yale University economist. "We are in a period of exceptional uncertainty about the value of our homes."
It is that issue – how far home prices rose – that sets this bust apart from other US housing downturns in the past century. This is more than a typical cycle where the pace of home building plummets. And this goes well beyond a crisis of subprime borrowers.
That's because this housing cycle now puts the wider economy at risk through several channels. First, the dive in home sales and construction subtracts directly from economic growth. Second, the erosion of property values is beginning to affect consumer confidence and spending. Perhaps more serious, write-downs of bad loans are crimping the health of banks, raising concerns that the flow of credit could be choked off despite Federal Reserve efforts to keep interest rates low.
In the boom, prices up 90 percent
What caused US home prices, as tracked by the Standard & Poor's Case-Shiller index, to shoot up nearly 90 percent in the first six years of this decade?
Easy credit laid the foundation for the run-up. But it also gathered a momentum of its own. As people saw the annual gains in home values outstrip the interest on a loan, they piled into the market.
Some worried that if they didn't scramble to buy, they'd never get another chance. Others were investors eager to "flip" homes for quick profits. When home values finally maxed out in 2006 – not because of any general trouble in the economy but because asking prices outstripped the means of new buyers – the stage was set for a reversal. Speculators backed out of the market and defaults began to rise for subprime borrowers, who face higher interest rates because they present a higher risk to lenders. When adjusted for inflation, housing prices have fallen an average of 8.9 percent this year, according to Mr. Shiller
Most economists expect them to fall further. Economists differ on whether this housing slump is tipping the nation into its first recession since 2001. It is certainly a big drag on growth.
Recession or no, it appears clear that some of the repercussions will be long-lasting.
Start with a historic surge in foreclosures that has made some neighborhoods look like disaster zones. The problem may not crest for several years.
Full Stoy here.
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