Experts: Repossessed Home Crisis Far From Over
The end to the repossessed home crisis is being awaited by everyone hoping that it will bring with it the much-hoped economic recovery. Billionaire Warren Buffet and former Federal Reserve Chairman Alan Greenspan claimed that the foreclosure crisis is nearing its bottom.
And some real estate barometers such as lessening inventory, rising buyer competition, increasing building confidence and slowing home price drop are contributing to the idea that the housing market could soon be rebounding.
However, some industry experts pointed out several issues that could debunked the turnaround theory. A healthy real estate market features a balanced supply and demand. Experts noted that there are several factors that may weaken demand and cause a surge of supply in the market.
On the demand issue, massive layoffs, high home prices and the credit crunch contribute to the reduction in the number of potential homebuyers.
On the supply issue, several factors are expected to trigger a second wave of foreclosures that may continue to expand the inventory. These factors include the increasing number of homeowners whose properties are worth less than the total mortgage they owed, foreclosure moratorium expiration, soft selling of luxury homes, increasing delinquencies in Alt-A and prime loans and pending resetting of option adjustable rate mortgage loans.
Some experts claimed that the increasing unemployment rate will be the main driver of the second wave of foreclosures. People who lost their main source of income do not have any choice but to miss on their mortgage payments.
Unemployment, according to experts, may also create a glut of foreclosed properties on the market as those who lost their jobs will most likely lose their houses too.
Meanwhile, principal at the Field Check Group consulting firm, Mark Hanson said that about 50 percent of buyers in the real estate market are first-timers, while investors accounted for a third of the purchases. This leaves about 15 percent of homebuyers who would opt to buy a property that is not foreclosed.
On the other hand, with the credit crunch, people who want to buy a home will find it difficult to find someone to give them a loan. Because of the current financial crisis, lending companies have become strict on their requirements, including a 20 percent down payment and good credit standing.
These leave many potential borrowers unable to find a mortgage to allow them to buy houses that may lead to the end of repossessed home crisis.
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