Foreclosures Pressing Down Prices Prompts Buyers To Jump In
September 5th, 2008
The rising number of foreclosures is pressing down prices in the real estate market prompting buyers to jump in for bargain deals. But increased interest rates and stricter lending rules are acting as dampeners.
Natasha Arocho is a young administrator and thought she had found a dream house for $174,500. A lender gave her the green signal to go ahead with the mortgage but so many details had to be filled in that a month passed by. By the time the particulars were entered, the deadline had closed. She felt frustrated having spent $1,025 on inspection and valuation apart from attorney fees. The experience has been so bitter that she has given up all plans ownership and is opting for rented accommodation.
The two reasons that are blocking the path for smooth mortgage sanctions is that the appraisals are on the low side and intensive details are being asked for. This has led to a decline in the sales. Coupled with this is the increase in interest rates.
Since this summer the Federal Reserve has lowered the interest rates charged for banks to borrow from it but the lenders have been charging higher mortgage interest rates. The mortgage companies argue that considering the volatile situation in the housing market, advancing loans for purchasing houses are risky propositions. The recent foreclosure crisis has made them very cautious. Values of houses have fallen and they have suffered losses. This has led to a fall of mortgage applications by 21% in the span of one year. Those who have high income and targeting properties in prestigious localities are finding the going easy. If one lender rejects they can always go to another. The sub-prime borrowers are worst affected in overbuilt suburbs. Lenders are demanding down payment ranging from 5% to 20%.
In Chicago the sale of houses dropped by about 29.2% in comparison to the previous year according to Illinois Association of Realtors. The sales of single-family units dropped by 58% and multi-family units by 49% according to Tracy Cross Associates of Schaumburg.
The real estate market is flooded with foreclosed houses and the tide continues to rush in resulting in an alarming fall in prices. Unemployment too is adding to the woes. In the last one-year only 900 new jobs were offered showing a drop by 97.7% in job growth rate according to Federal Reserve Bank of Chicago.
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September 6th, 2008 at 8:54 am
I have noticed here in Philadelphia that things seem to be picking up on a small scale. When people really feel like they are getting a good deal they will purchase and take advantage.
Jon of Short Sale Way