Events Leading to the Real Estate Market Crash of 2008

While many predicted the current collapse of the real estate market, others were taken by surprise when the market that had left plenty of opportunity in the last few years for profit began to tumble.

Certainly, one of the leading events that eventually resulted in the crash of the real estate market was the crumble of the subprime market. As a result an unfathomable amount of companies suddenly were suddenly facing foreclosure. Even those companies that were not forced to declare foreclosure found they had suddenly lost billions of dollars.

The news has been filled with reports regarding the subprime market crash; however, while it has affected most property owners to some degree there remain many of remain uncertain exactly how this came to be.

Just a few years ago subprime mortgages were a great advantage to many property buyers. Buyers who were interested in taking advantage of the hot real estate market but who lacked good credit histories were able to take advantage of subprime mortgages in order to obtain loans. The underwriting guidelines for these loans were generally more lax than traditional mortgages. This allowed even buyers with poor credit to obtain a loan. In exchange for making a loan to buyer with less than stellar credit, lenders were able to charge a higher rate of interest. In addition, so the theory went, lenders relied on the belief that they would be able to foreclose on property and sell it for a profit in the event the borrower defaulted on the loan.

The money which funded these loans came from a variety of sources. Low interest rates made it possible in many instances for lenders to actually borrow money and then loan out those funds to home buyers. In other cases, the money was obtained from more complicated sources. As you may or may not be aware, it is not uncommon for governments to borrow money from central banks. This practice is particularly common in the United States.

At the time the housing market was stable. In fact, the housing market was experiencing a high that had not been seen in quite some time. Beyond the fact that many homebuyers were taking on massive amounts of debt there also existed another problem. Due to the health of the real estate market at the time, in many cases there were expectations regarding future growth that in hindsight now appear to have been unrealistic.

The last two years of the real estate boom occurred in 2005 and 2006. During that time period lenders did not hesitate in the least to lend money to borrowers regardless of their credit profile. These loans represented a tremendous money-making opportunity for lenders. Problems really began to occur; however, when interest rates began to rise from their previous lows. Historically, rising interest rates have always had a negative effect on the real estate market. When rates are low they help to produce demand; however, when they are high they ultimately cause prices to fall. Until mid-2006 home builders could not build new homes fast enough to meet the growing demand. During mid-year; however, the demand began to slow. It was also about this time that the rate of defaults on loans began to increase.

Before long many mortgage lenders began to find it difficult to obtain money from their previous sources of funding. As a result, would-be buyers discovered that loans were no longer as easy to obtain due to the fact that money was no longer as widely available. Additionally, investors suddenly became wary of taking on risk and underwriting guidelines grew stricter. Homeowners who had taken out loans with adjustable rates began to find it difficult to meet their mortgage payments as interest rates continued to rise. More stringent underwriting guidelines meant they were unable to refinance to fixed rate mortgages in some cases. As a result, defaults continued to rise; fueling the massive rash of foreclosures.

Roger at Foreclosure Stopping Uncover the Startling Dangers of a Foreclosure that Could Cost You More than Your Home and the Tactics Necessary to Stop, Halt or Delay One. Foreclosure Help

A Look at the Future of the Housing Market

A Look at the Future of the Housing Market

In some of the worst housing markets in the country, deflation has reached double-digit proportions. While housing woes have reached around the country, California appears to be poised to rank among the worse. One of the primary reasons for this is the fact that in the last several months California has experienced the largest rate of deflating home prices. In fact, home prices in California have fallen at levels that have been unprecedented.

Miami, Florida has also proven to be a difficult market at the moment. Here, the weak mortgage market and record high rates of foreclosures have let to decreasing home values as well. In fact, Miami has been among the worst home markets in the country for two years running. The condo boom in Miami just a few years ago has fueled further problems that have now spiraled into a massive real estate bust.

While Florida and California may have been easy to predict as being among the first housing markets to crumble when the real estate market crashed, there are other markets that are on the precipice of falling which have not been as easy to predict. One of the primary reasons that Florida and California were poised to fall so rapidly were rapidly escalating home values during the boom a few years ago.

Other markets; however, did not rise as much or as quickly, which could be one reason why they have managed to avoid reaching the top of the list; at least until now. These markets include Arizona, Nevada, Indiana and Massachusetts. Declining home prices as well as high rates of foreclosures in these states are also contributing to their worsening real estate market conditions. In Michigan, where layoffs have been significant, the economy is playing a strong role.

Problems are expected to grow worse in many markets as several million adjustable rate mortgages are scheduled to be reset in the coming months. As these mortgages are reset, it is logical to assume that even more homeowners will find themselves facing the reality of being unable to pay their monthly mortgage payments in certain markets. When that happens they will be forced to either face foreclosure or in some cases make a short sell on their home as refinancing is becoming less and less of an option for many homeowners.

According to most statistics, the remainder of 2008 is still poised for problems in the housing market. Many statistics indicate that home values could continue to drop and new homes could experience a loss of up to 18% before the year is out. While there are some indications that the market could begin to level off at the end of 2008 or the beginning of 2009, many experts are quick to warn that when the market does begin to rebound it will not reach the point where it left off. In comparison to the housing peak of 2005, the rebounded market could still be quite a bit lower. Part of the reason for this is that in many areas, prices escalated so quickly that there is simply no way for prices to rebound back to that point.

Still, there may be some home for certain areas. In many markets sub-prime mortgages have either left the market through quick sales or foreclosure. The stimulus package that is on the horizon is anticipated to help the housing market in many areas.

First-time home buyers may soon find the relief they have been seeking since they were forced out of the market; however, it may longer before homeowners begin to experience that same kind of recovery. This is because most homeowners are still reluctant to sell and lose the equity they once had in their homes. The simple fact is that many homeowners have yet to accept the fact that they can no longer get the same prices for that was possible just a few short years ago.

Roger at Foreclosure Stopping Uncover the Startling Dangers of a Foreclosure that Could Cost You More than Your Home and the Tactics Necessary to Stop, Halt or Delay One. Foreclosure Help

foreclosure stopping

Using Creative Tactics to your Advantage While Selling in a Down Market

The real estate crash of 2008 appears poised to make the downtown of the last couple of years look like nothing at all. While the market crash is certainly disturbing, real estate market crashes are really not anything new. The real estate crash of the late 1980s certainly caused plenty of concern. During that time; however, many investors learned to use creative marketing strategies in order to survive the crash. Whether you currently have a property in a market where sales have slowed down or you need to move your property off the market quickly, there are strategies you can employ in order to avoid becoming a victim of current market conditions.

During the market crash of the 1980s many sellers found it helpful to offer to pay some or even all of the closing costs for the buyer. In many situations this can be a highly successful tactic; however, it does not work in all situations. In some cases, the lender may place limits on the concessions the seller is allowed to make. This is often the case if the buyer is purchasing the property using a Fannie Mae or Freddie Mac loan.

These loans are often attractive to many buyers because they are able to make a lower down payment. In return; however, sellers are frequently limited to concessions of 3% of the total amount of the sales price if the buyer is making a down payment of 10% or less.

In this case, you may need to come up with an even more creative strategy in order to sell your property. One option that many used during the market crash of the 1980s was to raise the price of their property. At first glance, this strategy may certainly seem as though it would be counter-productive. In reality; however, it is a very creative way for you to provide assistance to the buyer with their closing costs.

Here is how this strategy works. Basically, you agree on a price with the buyer and then raise the price by a certain percentage. That money is then given back to the buyer during the closing. On a $150,000 home with a 3% price increase that would amount to $4,500. This money would go directly to the buyer and help them in paying their closing costs. In return, the buyer would obtain a loan for $154,500 and essentially be able to cover their closing costs using their mortgage.

For this tactic to work the home must be appraised for the higher price in order for the buyers to be able to obtain the mortgage loan. Of course, the buyer must also be willing to pay the higher asking price and understand that their monthly mortgage payment will also be slightly higher as a result.

Many sellers are reluctant to make any concessions at all, preferring to try to obtain as much money as they can from the asking price for their property. In a down market; however, it is important to keep in mind that basically every month the property sits on the market is costing money. Over a period of several months this could ultimately amount to far more money out of your pocket than you would give up by making concessions early on in order to sell your property as quickly as possible.

Roger at Foreclosure Stopping Uncover the Startling Dangers of a Foreclosure that Could Cost You More than Your Home and the Tactics Necessary to Stop, Halt or Delay One. Foreclosure Help