Blog Post

According to recent reports from the Federal Reserve, most people living in the USA have seen their net worth slashed by approximately 30 percent compared to this time last year. Much of that erased value is the result of a deflated stock market, and loss of home equity also accounts for serious eradication of wealth on paper. But the stock market made strong gains in May and June, and home buyers also showed increased confidence thanks to bargain pricing of real estate, greater liquidity in the mortgage markets, and affordable interest rates.

Another factor fueling home buying is the whopping $8,000 tax credit for first-time home buyers that was included in the economic stimulus package passed at the beginning of the year. The government basically defines a “first-time home buyer” as anyone who has not bought within the past three years; so many Americans are taking advantage of this rare perk.
Stronger home sales have helped to remove some of the backlog of excess inventory, and the adjusted index of sales contracts compiled by the National Association of Realtors (NAR) surged 6.7 percent in April. The numbers were much higher than industry analysts had expected, and it was the most significant jump in pending sales in nearly a decade.
The median price of a single family home is now $170,000 – 15 percent less that it was a year ago and approximately 30 percent cheaper than prices were right before the real estate bubble burst. Some homeowners may greet those numbers with dismay. But wringing the artificial inflation out of real estate is actually a healthy phenomenon. It shows that the housing market is gaining traction lost during the frenzied subprime and toxic mortgage-backed securities boom.

Meanwhile it is too soon to know whether President Obama’s $50 billion foreclosure prevention initiative will stem the tide of foreclosures. Until that hemorrhaging is halted it is premature to declare light at the end of the economic tunnel. But the new data from the NAR and other reliable sources does offer hope that at least there are reasons to be optimistic heading into the second half of 2009.

Posted 16th April 2009 by Sally Forster Jones