Effects of recession in the US real estate market 2010

By shaye • July 21st, 2010

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The credit crunch and the great depression of 2007 has played a negative role in the US real estate market. The housing market is still on its way to recovery from the recession.

Effect of recession in real estate market

From the very past the US real estate market has played a very important role in giving a shape to the usage of urban land. According to the principles adopted, it gave the owners the opportunity to earn maximum value for his land.

But the recession of 2007 has led to unemployment, and as a result, the demand for house has lessened and new constructions have also become very few in number. Though many first time home buyers are there in the market, but, the fewer number of sellers could not meet the buyer’s demand. As a result, the profit decreased, price of inventories increased, sales went down and the US real estate market has faced an incredible number of foreclosures.

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According to the National Association of Realtors (NAR), the number of homes that received foreclosure notices in 2009 is 3 million.

Recent situation in the real estate market

To make up for the loss, the government has introduced option ARM, by which the home buyers can choose how much they want to pay each month during the ‘start period’ of the loan. They have the choice of paying from the following options:

a 30-ear fully amortizing rate

a 15-year self amortizing rate

interest-only payment

a base rate ( which does not cover the monthly interest costs)

This offer, along with unemployment rate of 10.5% in 2010, will make more and more homeowners unable to repay their mortgage.

The loan modification program of the government has can also cause home prices to fall by 5% to 10%, prior to the stabilization of the real estate market. It is predicted that the market will have a noticeable rebound by 2013.

The government’s offer to extend $8,000 for first time home buyer tax credit till the middle of 2010 and expansion of the program to include $6,500 credit for non-first time home buyers will attract more home shoppers into the market.

Already the US real estate market is showing signs of stabilization in demand and price. For the last 6 consecutive months, the home prices are on a rise. The market has already started to recover from the effects of recession, but, it will need some more time for full recovery. According to a recent survey, 77% of the richest people in the US feel that now is the right time to buy real estate properties, as the price of home is low. Though the market has suffered a great loss, but the initiative taken by the US government to reduce the loss is to be appreciated.

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Belinda Dawson is a contributory writer associated with www.realestateisp.com and has written several articles for various financial websites. She holds her expertise in the Real Estate industry and has made significant contribution through her various articles on Real Estate and topics related to it.


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