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Most Common Myths About Housing Market Recovery

by Uneeb Khan
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Most Common Myths About Housing Market Recovery

Economic growth increases incomes, making housing more affordable for more people. However, a rising tide doesn’t lift all boats. Over the past 25 years, the top 20% of the U.S. income distribution has seen sharp increases in earnings, while the middle 60% of the income distribution remained fairly even. Though the gap has narrowed since the late 1990s, it’s not close enough to reverse the long-term trend. As a result, more buyers are being priced out of higher-end homes.

Buyers Should Wait for Prices to Fall

If you are considering buying a home right now, there are many myths about the housing market’s recovery. Some of these myths are completely false. Prices are still falling. While prices are likely to recover in 2012, it will take time. Some would-be buyers are putting off the purchase until prices fall further. Others are hoping for a seller’s market.

While home prices are still high, they are expected to increase gradually over the next few years. The Great Recession was triggered by a bursting housing bubble. While home prices might go down in the short term, there is no indication that a massive wave of foreclosures will hit the market. Additionally, mortgage rates are rising, making borrowing more expensive. However, this is not necessarily a reason to wait for prices to fall.

Foreclosures Are A Thing of the Past

When the housing market crashed in 2008, many homeowners were encouraged to spend more money than they could afford on their homes, causing many to fall underwater. In addition, low-interest mortgages encouraged many to overextend themselves, resulting in homeowners who couldn’t sell their homes for enough to pay their mortgage. Many homeowners ended up walking away from their homes, but this is much less common than it was seven and eight years ago.

The good news is that home values have risen significantly in the last year. While the median home price has increased 24% since the pandemic began, the specter of foreclosures remains in many cities. Among those affected by foreclosures, a neighborhood like Edgewater Park has one for every four64 homes. According to RealtyTrac, which tracks foreclosure data, a neighborhood with a high percentage of foreclosed homes is at risk of being plagued by crime and vandals.

Mortgage Rates Are Low

For many people, the best time to buy a home is now. The housing market has recovered from the bottom, and many experts are calling it a remarkable recovery. In many cases, homes are selling quickly and buyers are back in the market. And one of the biggest motivating factors for buyers today is historically low mortgage rates. The average mortgage rate has lowered several times this year and continues to hover in record low territory.

Many Flat fee real estate agent have been active in the housing market, but they aren’t to blame for the high prices. While investors are active, first-time home buyers are responsible for about a third of buyer activity. With low inventory levels, many sellers are caught in a Catch-22. They are scrambling to buy, and buyers are snapping up homes faster than they’re coming on the market.

Investors Are Driving Demand for Low Priced Homes

The current undersupply of homes for sale is primarily the result of decades of local opposition to the development of new homes. Private equity firms and Wall Street greed are not driving demand for low-priced homes. Millennials are a key segment of the housing market. They are a crucial part of the housing market’s recovery. In fact, millennials have become the largest single group in the market.

As a result, home prices have reached record highs, making it difficult for individual homebuyers to take advantage of the housing market’s recovery. But home prices have become so expensive that some investors have begun to turn to purchasing homes sight-unseen. In many cases, investors waive inspections and appraisals, making all-cash offers far above the asking price. Non-investment buyers often request appraisals and inspections. But investors offer quick closings. This type of buyer is known as an “instant buyer,” and they are a rapidly growing subset of the investor market.

Government Bailout of Subprime Borrowers

The Federal Reserve’s recent action to help save the financial system after the Great Depression is a clear example of why a Government bailout of subprime borrowers would not be in the nation’s best interest. A similar decision was made by the Federal Reserve a decade ago, when it intervened in a hedge fund’s collapse, saving it from a larger financial collapse.

The original intent of a bailout was to unfreeze the financial system and spur lending. Instead, banks piled up their reserve balances at the Fed, hoarding cash in hopes of making interest payments. The Federal Reserve Chairman, Ben Bernanke, said that the twelve largest banks were in danger of failing within a week or two of the initial bailout period. The bailout was meant to help those banks that had the most trouble.

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