President Barack Obama is bent on slowing the tide of foreclosures in the country hoping that it would trigger the turnaround of the economy. Americans believe that once the housing market recovers, all else will follow. This perception was due in part on the role of the collapse of the housing market on recession.
However, most industry experts believed that mortgage delinquencies caused the financial crisis and the increase in the number of cheap houses for sale in the country.
Mortgage delinquencies resulted to foreclosures and a 26 percent slide in home prices that led to a flood of cheap houses for sale and weak consumer confidence. Also, housing-related jobs such as real estate agents, carpenters and appraisers have declined by almost 1 million, amounting to a quarter of the unemployment rate.
Industry experts contend that the housing crisis reflects a market with an abundant supply of cheap houses for sale due to mortgage delinquencies, foreclosures and lack of demand. They pointed out that high inventories of cheap houses for sale also affected the construction industry.
Meanwhile, the National Association of Realtors’ affordability index showed the estimated family income that is needed to purchase a home for a median price, provided that the buyer gave a down payment of 20 percent and the monthly mortgage payment is equal or not more than 25 percent of his pre-tax income.
Cheap houses for sale is at its peak in 2009 since the affordability index started in 1970. However, demand failed to keep up with the market affordability and the abundance of cheap houses for sale.
In January 2009, new home sales took a dive by 10.2 percent while existing home sales slid by 5.3 percent.
Industry experts agreed that despite the abundance of cheap houses for sale, buyers are hesitant to take advantage of the situation because of deflation and they would rather wait for the market to stabilize first before making any purchase.
However, they pointed out that as buyers wait, home prices will fall further. As such, to break this vicious cycle, experts suggest that the Obama Administration entice prospective buyers to take a plunge by giving them a tax reduction of 10 percent for a maximum of $15,000 for every house they purchase.
They believed that the most effective way to reduce foreclosures is to encourage economic recovery by inducing home buying.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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