Analyzing The Influence Of Economic Recession On Property Pricing

Although we are receiving brief spells of relief and some hints of recovery

, we are entirely concerned that the more serious is far from over. Resiliency seems to be the order of the day, and there is still the high sense of urgency for people to remain guarded and conservative in their business. While we have been seeing constructive chief hints for more than a year now, the financial system cannot seem to summon enough momentum to recover from the financial hump.

One obvious proof that the good old days continue to be far down the road is the overall state in the property market. Rates stay depressed and continue to be hovering within the 2003-2004 levels. Even though, we are no longer seeing abrupt dips in prices for several months now, the overall condition continues to be incredibly unpredictable. There are short periods of small rebounds here and there. However, market analysts and industry specialists commonly attribute this to a couple of speculators that exploit financially-distressed and foreclosed real estate. At the long run, these rallies don't amount to substantial rise in sales or major cut in the current inventory.

The income statistics in the new homes segment remain low and in many cases, a significant uptick in the sales of new homes is not anticipated to possess a serious effect on the bottom line, especially in the inventory of real estate that are presently being held by financial institutions and mortgage companies.

We are no longer seeing alarming rise in the delinquency rates; although the facts continue to be "alarming." In a new report released by the banking sector, the joined percentage of loans in both one-payment-past-due and foreclosures was at a high of 13.16%. The facts are upsetting. Regardless of the positive mood being given away by stakeholders, no considerable move is anticipated from main players anytime soon.

The main focus has become on the state of REO inventory. Real estate players and market analysts are in agreement that there has to be a major advance in this phase to be able to spur an actual recovery in the real estate business. Actually, some quarters believe that the inventory must be cleared before we can anticipate things to cool down. You can find indications that this may take years to accomplish according to the present state of inventory of REOs in most real estate markets.

There are other significant variables that we have to keep in mind when assessing the general impression of these persistent monetary woes that we are encountering. These include the quantity of house owners who are in negative territory or those who are known as homeowners with "submerged" debt. For the last 15 years or so, consumer expenses were primarily driven by acquisitions of hard assets. Which means most consumers would not have been in a position to borrow money against the appreciated value of their home if the rise in value of their home has not been sustained. Noticeably, the opposite is what we are witnessing right now.

Further, a mere 2% of the whole number of house owners with mortgage has more than 20 percent equity in their current home. With the dominant equity prerequisite of most banks and mortgage companies of at the very least 20%, it is relatively noticeable that very few will be fortunate enough for getting home equity loans.

Most of these pessimistic forces are placing more strain on the economy and making the road to recovery quite bumpy. This means that both the government and also the private sector require developing with perfect policy changes and strategic decisions to actually put the economy on overdrive. The first goal is to produce the positive regime where solutions go beyond borrowing more money.

by: Tara Millar.

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