Greg Preite
30 year mortgage rates hit nearly 4.5% yesterday. The fourth time in just 5 weeks that a new record low has been hit. 15-year rates decreased to nearly 4.0%. A few years ago this would have been earth shattering news, but today it does little to bolster the soft housing market or to put more Americans into homes. As mortgage rates have continued to decline in recent months, lending guidelines have done nothing but become more stringent for all loan types- conventional, jumbo, and government. The National Association of Realtors reported that existing home sales were down 5.1% last month, showing that the lower rates weren't really helping more Americans achieve home ownership. Here's why...
Expiration of Federal Tax Credit for Home Buyers
This credit was eliminated after April and with it went any sort of "urgency" that buyers had purchase now. Many are content to rent now and ride out the crushing wave of the recession.
Tougher Loan Guidelines
The vast majority of people can not qualify for a home loan due to credit problems, a lack of adequate job history, low income, or high debt. In the past, sub-prime or "Alt-A" loan programs existed for individuals with challenging situations. Those programs are now all but gone. Banks and mortgage lenders have instructed their underwriters to look extremely critically at every loan file and question every detail. This often frustrates even the well-qualified buyer to the point that they may opt not to purchase a home.
A Lack of Housing Inventory
In many areas, although there may be a high volume of foreclosed properties, the banks that now own these homes release them very slowly on to the market. Their goal is to generate competition among buyers, create a shortage, and increase prices as a result. It is not uncommon for buyers is some areas of the country to submit offers on 15+ properties before finally getting one accepted, a process that many people do not want to undertake.
Unemployment
With millions of Americans out of work, and even more who have been forced to find new jobs, start their own business, or take pay cuts, a huge sector of the population discovers that they are ineligible for any sort of financing until they have a minimum of a 2 year history in their new line of work. For the worker who has been laid off or downsized, simply finding a new job does not mean that a lender will consider income from that job towards qualification.
Lack of Liquidity
Studies have shown that as credit has tightened, savings for most Americans has dwindled. For those people without sufficient savings for a down payment, closing costs, and adequate cash reserves (most banks will require 6 months of cash reserves on conventional loans) home buying may not be a realistic option- even if income and credit are not a problem.
With all of these factors and many more not mentioned here weighing in heavily, there is still a long road ahead for many people seeking home ownership. The problem now is going to be the time required not only for recovery, but then for a sustained period of stability, before banks and lenders have the courage to lighten up. Unfortunately, that could be years away.
Been laid off, downsized, or capsized out of a job? Go to http://www.lowcostfranchiseopportunities.info and find dozens of home based franchises for your review.
Looking to learn effective skills for building an online business? You can become a marketing consultant! Register to learn more at http://www.onlineprofitstrategy.com
Photo:
http://www.prlog.org/
