Magazine article The CPA Journal

Homeownership

Magazine article The CPA Journal

Homeownership

Article excerpt

Is It Still the American Dream?

The latest economic recession caused a nationwide drop in housing prices of more than 30% since 2006approximately $7 trillion - according to a U. S. Federal Reserve whitepaper, "The U.S. Housing Market: Current Conditions and Policy Considerations" (http://www.federalreserve.gov/publications/otherreports/files/housing-white-paper20120104.pdf). In addition, it left many mortgages underwater (i.e., the property value was less than the loan balance) and contributed to a significant increase in home mortgage foreclosures. For those homeowners, the American dream turned into a nightmare. As homeowners anxiously watched prices continue to fall, many had only one question on their minds: 'Have we hit bottom yet?'

According to many experts, 2013 may be the year that we see the beginning of a recovery for the real estate market. It is worth noting mat, like all things concerning real estate, the three most important factors are location, location, and location. During this economic downturn, specific regions of the nation experienced more significant housing price declines than others. The recovery seems to be similarly uneven, but related to local employment - a key factor in housing demand. Will an improved job market and economic growth be enough to revive the real estate sector?

Opportunities and Challenges

The glut of housing inventory will likely take several years to deplete and reach an adjusted equilibrium between supply and demand. But for those who haven't been scared off by the steep price declines over the last few years, there is a silver lining: buying a home is more affordable now than at any time in the recent past. And historically low mortgage rates further enhance affordability for homeownership. So why aren't American consumers rushing to buy a house?

One reason could be apprehension of further declines in property values. In addition, many applicants can't get approval for a home loan, given the tough new standards - such as larger down payments and high FICO credit scores - that have been implemented by lending institutions since the subprime mortgage scandal. In some instances, even if a loan applicant passes muster, the home might be appraised at a lower value than the negotiated purchase price. …

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