Optimists keep claiming that things in the real estate world are looking up, but reality keeps reminding us that things are not all sunshine and roses just yet. Even with the current government incentive program for encouraging home buyers into taking the plunge and buying that dream home, the American people are just not itching to buy real estate right now.
According to a recent survey by the Mortgage Bankers Association, the numbers of home buyers in need of a mortgage for new home purchases have been sparse for the past six months and will likely continue to be for a good part of this new year. Partly, this is due to higher interest rates, but also likely because of consumers' confidence in the strength of the economy.
This year we've seen the rate for 30 year mortgages jump up 0.1% to 5.18%, the highest level the country has seen since the end of August when the rate was 5.24%. The number of mortgage applications dropped significantly over the holidays and has only risen a marginal amount since then in the first weeks of January.
Experts say that the rise in mortgage applications last year was due only in response to the government's tax credit stimulus and that once it is over the number of people buying homes will drop to even lower depths. This issue, in combination with the large number of people across the nation who are unemployed, as well as rising numbers of foreclosures and mortgage defaults may all have a hard impact on the struggling economy.
In addition to the buyer's tax credit, the government has also been funding a program to help keep down the mortgage rate by buying mortgage-related securities. The Federal Reserve's program will be ending shortly before the tax credit stimulus is scheduled to finish in April; the combination of both of these programs ending around the same time will likely cause issues with the struggling economy and housing market.
There is a little light on the horizon, however. It is predicted that mid-way through the year there will be some recovery in the employment sector which will likely start to turn the market around; more money in the hands of consumers can only prove to be healthy for the economy and hopefully translate into more people being able to afford to buy into the housing market.
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