Have Home Prices Stabilized?

The real estate market has come back to life in some areas

, with home prices starting to stabilize and rise again. Is the real estate market truly recovering, or just temporarily resuscitated from government life support?

The Federal Government has taken extraordinary steps to help lift home sales and prevent further escalation of home foreclosures, bank failures, and home price declines.

While this support has maintained the integrity of the real estate market, it does raise a question about the sustainability of home prices after government subsidies are removed.

Mortgage interest rates have remained artificially low because of the Federal Reserve's commitment to stimulate home sales and refinancing by purchasing mortgage-backed securities. Once the Fed ends this program, interest rates are expected to rise in order to attract mortgage investors, and higher rates can reduce the pool of qualified borrowers.

Various state and federal home buyer tax credits have also been effective subsidies for maintaining home prices. Housing demand has been increased by these lucrative offers, some of which were extended and expanded to include some previous homeowners, in addition to first time home buyers. However, tax credits creates artificial demand for a limited time period, which means the market may lose momentum after they expire.

The Government's attempt to subsidize loan modifications may be successful at keeping many real estate foreclosures off the market, but a substantial number of those modified home loans are re-defaulting, which could only prolong the foreclosure process and the true recovery of the housing market. Downward pressure on home prices may be the end result if banks need to quickly sell a growing portfolio of homes, referred to as the shadow inventory.

Then there is the money being funneled to Fannie Mae and Freddie Mac to compensate for default losses. FHA may also need bail out money, and reduce their risk of loss by making their mortgage guidelines more difficult to qualify.

Sustaining home prices is a critical part of our economic recovery, and Government support is buying time in the hope that investor and consumer confidence will improve, but the question remains about how prices will fare when federal subsidies for real estate and mortgages end.

by: Rick Smith.

POST COMMENT

Landscape Painting A Professional Carpet Installation Queens Cleaning a Carpet - Tips for Quality Solutions Outdoor Fire Bowls Give Your Kitchen Shine With Countertop Resurfacing Traditional Bathroom Vanities For Your Bathrooms Tips On What To Seek Out In A Carpet Cleaning Company Small Estate Probate - Do It Yourself Living Estate Auction Aj Karas Auctioneers Sept. 12th Different Nevus Removal Methods Such As Home Remedies Ottawa Kitchens - Kitchen designs, ideas, and renovation tips Door To Door Loans – Good Opportunity at Your Door Tips For Cleaning Your Home Off E Cigarette Smoke