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Here's a news release issued by the NAR in November, 2003: "The National Association of Realtors has created a first-of-its-kind campaign, which declares that "It's a great time to buy or sell a home", which will launch today with full-page ads in The Wall Street Journal and USA Today." Those who purchased a home based on that advice bought into one of the greatest real estate bubbles of all time. There are many who make their living from the real estate market one way or the other. Be careful about acting on the advice from those quarters. Right now you will hear some of them predicting that the worst of the housing crisis is about over. Really? What about this: The number of home foreclosures accelerated in the second quarter of 2008 to the fastest pace in 30 years. As interest rates climbed and home values fell more Americans walked away from homes they couldn't refinance or sell. New foreclosures shot above 1 percent for the first time in 29 years according to the Mortgage Bankers Association. The number of homes facing foreclosure almost tripled since the housing bubble popped in 2005. Further more, the number of loans with one or more payments overdue rose to 6.41 percent of all mortgages and that's an all-time high. Crashing home prices are making it near impossible for home owners with adjustable-rate mortgages to sell or get a new loan. Here's the unvarnished truth, darn few real estate people or economists seem to completely understand the magnitude of the real estate problem. Peter D. Schiff, Euro Pacific Capital Inc.'s president and chief global strategist explains it like this: "When real estate prices were expected to rise in perpetuity, the price of a house had two components - one part representing shelter and the other investment. The shelter component was the actual utility and desirability of the house and the investment component was the expected future appreciation." "My guess is that at the peak of the real estate mania, a $500,000 house might have consisted of $250,000 for the shelter component and $250,000 for the investment component." During the bubble home buyers were blinded by a home's potential to increase in value. The inflated value would allow the owner to pull out cash through refinancing and home equity loans. That cash would not only offset the cost of mortgage payments, taxes, insurance and maintenance, but also provide the money and credit to buy cars, vacations and other luxuries. Because of that promised new source of ready cash, buyers were willing to pay greatly inflated prices for houses and take on mortgage payments that they would never even have considered during a normal real estate market. Lenders felt well protected when home values where climbing, so they began making mortgage loans to almost anyone willing to sign on the dotted line. Now that the party is over lenders are closely checking on the borrower's ability to pay. With banks and lenders in a state of crisis those lending standards will become even tighter. Now let's consider the bottom line. Even though it is becoming harder to qualify for a mortgage loan does not mean people will stop buying homes. No, they will just pay less for a home, fewer people will qualify as buyers, so fewer new homes will be needed and fewer will be built. We've all lived through one of the most startling boom and bust cycles in American history. I hope we've learned something from it.
Article Source: http://www.bharatbhasha.net Article Url: http://www.bharatbhasha.net/real-estate.php/97526 Article Added on Friday, September 26, 2008
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