Housing Market Slumps As Credit Crunch Bites Into Mortgages

Housing Market Slumps As
Credit Crunch Bites Into Mortgages

Slumping property values and stricter lending practices have many homeowners grappling with the helplessness of watching their homes sell to the highest bidder. The first quarter of 2008 found foreclosures doubling as compared to the previous year. The hardest hit states struggle to keep the housing market afloat.

Nationwide foreclosure filings occurred in every state but four and the mortgage crunch roils the real estate market. That averages out to be approximately one in every 195 households that have received foreclosure notices. Nationally, over half a million homes received at least one foreclosure related notice - an increase of over 110 percent from the prior year. As homeowners stand helplessly by watching their dreams get auctioned off, the one recourse is for people to start buying property.

However, lending institutions have tightened up their loan policies thus creating a smaller population to purchase property. The rock bottom interest rates of the early 2000’s caused an influx of home buyers. To capitalize on that trend banks offered adjustable rate mortgages. The ARM's boasted low closing costs while lowering standards of credit worthiness.

This practice allowed for more people the purchasing power of real estate. With this power, the intent of the homeowner was to build equity in the home, then remortgage prior to the increase of the interest rate. The idea for investors was to increase the property value and sell at a hefty profit, also prior to the interest rate increase.

Finally, An Effective Credit Repair System That Instantly Deletes Inquiries, Charge-Offs, Late Payments And Judgments From Credit Reports… Watch The Video And See For Yourself!

The catch-22 of such a practice was that when the adjustable rate mortgage “matured” - interest rate increasing to the most current rate - homeowners experienced a jump of hundreds of dollars on monthly mortgage payments. This mortgage crunch roiled the market by casting the homeowner into financial delinquency.

The hardest hit states include California, Nevada and Florida. The greatest increase of foreclosure notices went to Stockton, Calif. whose average was that of almost 7 percent higher than the national average. The campaigns created by lawmakers and mortgage lending institutions that to help alleviate at-risk homeowners seemed to have failed or were just not paying off quickly enough. Yet an escape from this cycle would be for people to start purchasing real estate.

However this process is moving at a snails pace due to the stricter guidelines lending institutions have implemented. The requirement of near perfect credit along with a significant down payment has left many prospective home buyers unable to obtain loans. And with the supply of real estate greater than what can be supplied in buyers, the mortgage crunch continues to roil the market. Yet relief to these paradoxes is not forthcoming.

Therefore, the once affordable payment became a financial burden. The struggles incurred by the rising cost of food and gas coupled with increased mortgage payments found homeowners falling behind on their mortgage payments. Thus forcing banks into doling out more foreclosure notices.

While the mortgage crunch roils the market with the flood of foreclosures nationwide, real estate values have plummeted to add insult to injury. Real estate seems to have stagnated in value or fallen sharply. Yet, lending institutions have yet to entice prospective home buyers by offering discounts on repossessed homes. To break this cycle, people have to begin purching real estate again and bank have to offer realistic lending options.