The AP would love to cry wolf and say that because new home starts are down, that we are headed for another catastrophic downturn. I am not saying this is a certain untruth, but it is not necessarily accurate. Every fall the housing starts go down and as any real estate professional can tell you, from Halloween to New Years is almost a mandatory vacation.
The federal government has established the first home buyer tax credit program to increase the rate of home purchases and attempt to bring stability to the housing market. Since the tax credit was extended and expanded to allow investors to use it, we can expect next year to better this years seven percent appreciation rate.
A change in market trend has brought about a significant change in borrowing opportunities for home buyers. Previously, due to the depreciation in the national market, Primary Mortgage Insurance was nearly impossible to get as no insurer wanted to insure a home’s value when uncertain they could recover enough money to make it work for them. With this years seven percent appreciation lenders are more eager to lend since they can get insurance to displace their risk some.
Although this is an unpopular practice in most circles, this will help the real estate market. Many people think we should return to the school of thought that says you save your money until you can put 20% down, and I agree with that. But, with the government declaring that the American Dream is not just for those who have the discipline and means to save, but to everyone, we have the position we are in now.
Without a return to responsible saving practices with the average citizen the national housing market will continue to suffer from these periods of volatility. With the last round of tax credits expect to see housing starts back up this spring and the possibility of another high single digit period of appreciation as the recovery is on the way, as slow as the journey may be.
Without stability in the housing market many out of work construction workers will simply not be able to find work, even in the short term.
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