Another Drop Headed For Real Estate?

After the free fall in real estate prices in 2008, many people thought the worst was behind us, but the projections indicate that we are headed for another steep decline in prices over the next 12 months, after the brief gains fueled by the tax credits.

With a drop of 10-15% anticipated, the coming price drop has been pushed by a combination of federal factors that are combining for the perfect storm in real estate.

Three years after the peak of the real estate boom and the news is still buzzing with real estate news. Chicken Little Syndrome initiated the bust and has continued its decline, even though we did have 7% appreciate across the nation this year.

The function of the FHA is to make sure those who would not normally be able to buy a home, can do so, but they are raising their standards which will make buying a home harder for poorer buyers.

Due to the inundation of foreclosures, the FHA reduced the number of qualified buys by forcing those with the weakest credit to pay higher payments for mortgage insurance, increasing the required down payment and limiting seller contributed closing costs.

As people experience credit difficulties and cannot present high enough scores to qualify for conventional programs, more people are turning to FHA backed loans for assistance.

Due to these trends many borrowers are considering the FHA as their only source available for financing their home purchasers, which means the government will be backing even more loans than the already burdened Fannie Mae and Freddie Mac do. A lot of people who can’t get loans from the FHA will have nowhere else to turn.

FHA programs do not seem to be fading in their role in the real estate market, despite the higher requirements to get one now. First time home buyers and people with lower credit would not be able to buy without similar programs.

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