Housing Market Recovery- Federal Rescue Initiatives Begin To Take HoldMarch 24th, 2010 Several signs indicate that all of the federal government's efforts to rescue the fledging housing market are beginning to produce noticeable results. Some experts even project that deflation has crested, despite the fact that another wave of home foreclosures is expected in the hardest-hit states. Although threatening a recovery that's just beginning to take hold, these foreclosures should help lure home buyers looking for bargains on housing. It is for most housing markets in the U.S., according to assessments made by some housing experts. They make this claim even after acknowledging an impending wave of foreclosures. Three states experienced the highest real estate deflation, with rates in excess of 75% in the country's most severely affected markets. However, several government programs implemented by the current administration are helping to slow deflation. Most markets in Florida, California and Nevada, states that were hit hardest by the housing crisis, suffered deflation averaging 50% and more since their peak. But a pent-up demand among buyers has created a situation of too many homes being offered at record low prices. And that means prices on foreclosed properties are even lower. However, competing with owner occupants for those foreclosure deals are investors able to pay with cash. Already these investors have bought more than a quarter of the available foreclosure inventory, according to some studies. Despite implementation of several government programs designed to spur the housing market, consumers' weakened confidence has caused many areas to experience a slowdown in home sales. Stepping in to help curb rising mortgage rates, the Federal Reserve and the U.S. Treasury Department have jointly purchased mortgage-backed securities worth $1.25-trillion. According to figures released by the Treasury Department, this purchase has benefited over 4-million homeowners by enabling them to refinance higher-rate mortgages. But that's not all. The federal loan modification program has helped over 1-million homeowners remain in their homes by temporarily lowering their mortgage payments; resulting in an average savings of $500 a month. So far around 170,000 mortgages have been modified permanently, and over the upcoming months, the Treasury Department expects that number to grow by several hundred thousand more. Another government program giving first time home buyers as well as move-up buyers an incentive to purchase is the federal home buyer tax credit. Already extended once, the credit has benefitted several hundred thousand buyers so far. Billions of dollars in federal money is being given by various Housing Finance agencies to help implement and fund a number of state-assisted programs. The goal of those programs is to help communities with high home foreclosure rates begin to stabilize. An additional $2-billion in funds allocated by the Recovery Act is also being used for the stabilization effort. Unfortunately all of these efforts may not be enough to stem the rising tide of foreclosures. Loose lending guidelines during the housing market boom enabled many who couldn't otherwise afford a mortgage to purchase homes. After the housing bubble burst, many of these buyers could no longer afford their mortgages. As a result, many have defaulted on their loans, and banks are preparing to initiate foreclosure proceedings. Nowhere are the effects of the housing crisis more noticeable than in Florida, Nevada and California. The first promising signs of stabilization are about to be overshadowed as financial institutions begin aggressively pursuing these foreclosures. That action will result in putting more lower-priced foreclosed homes on the market during the busy summer months when buyers are out house-shopping. In the long run, increased demand for more affordably-priced homes should help housing markets in these areas recover. |
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