Home owners across the nation may be looking for a miracle of sorts to shore up the sagging home prices.
Ever since the economic meltdown of 2008 home prices have remained under pressure though some segments did show feeble signs of recovery.
At the beginning of 2012, a critical analysis of the ground realities do not point to any marked improvement in the coming months and it could well be beyond 2014 before home prices can stabilize and commence its upward journey yet again. Here are our observations in a nut shell:
- 900,000 – Residential properties on various banks’ balance sheets.
- 600,000 – Residential properties waiting to reach the market.
- 1,200,000 – Properties in varying stages of foreclosure.
- 4,000,000 – Potential delinquency
These observations are based on surveys conducted by some of the best names in the industry, RealtyTrac.com and Trulia. The survey further points to the fact that a growing number of Americans feel that a recovery in the real estate markets can be a good 2-to-3 years away which actually makes it the perfect time to invest in a home now when prices are at historic lows.
Hurdles for home buyers
The numbers presented above should have brought an avalanche of home buyers because at no time in recent history has there been so many choices at prices that are closer to historic lows in most major cities. But, there are several kill joys that accompanies the down trend. First of all, the median income in the hands of the common man has either stagnated or has dipped. Add to this, the rise in cost of living across the nation, for many individuals, personal finances are pitching below the comfort zone.
Those who are in comfortable jobs are eager to hold on to what they have than explore new pastures for fear of finding the right job and at the right place. In cities like Detroit the situation is even more challenging because the majority of the city’s population depended on the automobile industry whose fortunes were compromised by the economic meltdown and the sharp rise in oil prices.
If these were not enough disincentives for the home buyers, borrowing money to fund new home acquisitions has become more painful. Most mortgage lenders are now seeking a 20% or more in upfront cash margins. This singular measure has the potential to drive away a good percentage of intending home buyers.
Systemic Issues
The root cause of much of the troubles that the U.S. economy faces today can be traced to excessive supply of credit to support a consumption driven economy. Credit is good in the hands of people who have the consistent ability to repay and repay in time. In the real world today, it is the credit card companies who are laughing all the way to their banks. One look at the penal interest levied on belated credit card payments and you know why credit hurts. Then you have loans to pay off credit card dues, followed by credit repair schemes and all those helping hands reaching out to drill more holes into your wallet. These systemic issues cannot be addressed by any one individual. The nation as a whole will need to revisit the underlying infirmities and induce better fiscal discipline that can percolate down to the individual citizens.
Global Concerns
If the pains at home were not enough for the U.S. real estate market, external factors such as the European Union debt crisis add further dimensions to the recovery process. As Wall Street continues to impact global financial markets the strength of the green back or the lack of it will reverberate across continents. From Gold to Oil the U.S. dollar is attached to far too many products and services around the globe. Therefore, while a vibrant economy in the immediate neighborhood can make positive contributions to the home, weaknesses in the same region can negatively impact our economy.
