housing market Essay

12/8/2013
Housing Market

The housing market has radically changed since the economic collapse in 2008. The collapse led to a huge drop in the housing market, and created a lot of controversy over if it has bounced back or not. It has affected everyone in the housing market from the mortgage lenders to the buyers and sellers of houses. Because of the subprime loans, which many attribute as part of the reason that the economy crashed, that banks are much, more conservative with whom they give housing loans to today. People are starting to feel that we have finally started to reach a turning point in the economy in the housing market. The banks have started to give mortgage loans with low interest rates to entice buyers. In 2012 housing prices even started to go up again. Although there are many signs that the market is heading towards a good place, people are still wary of buying and trusting the market.
In 2012 there was a sharp price increase with an average rise of 9% over six months from March to September. This came after a five-year decline in prices and the economic collapse. This rise coincided with an unemployment rate, which dropped from 8.2% to 7.8%, there was also a decline in foreclosure activity. By 2013 “the national medium home price increased 10.1% in November to $180,600 from the same period a year earlier, according to the National Association of Realtors. This marked the ninth consecutive month of home price increases.” Analysts at Clear Capital say that this year the gains will be more restrained. The 2013 housing market should be interesting, where national gains should continue to see upward growth, but a much more modest growth. “Clear Capital expects prices to rise just 2.1% nationally this year.” This will be good for most buyers especially for the ones in certain states where the growth in housing prices has out priced some buyers. However there are some states where Clear Capital expects prices to rise, Seattle is expected to rise 13.5% this year, and Birmingham, Alabama with a 10% increase. There are some exceptions to the national growth, eight out of the 50 markets studied see prices fall in 2013, and they fall only slightly. “Those markets are St. Louis; Chicago; Baltimore; Atlanta: Philadelphia; Denver; Charlotte, N.C.; and Louisville, Ky. None of these markets is expected to drop more than 1.7%, however, according to Clear Capital. These statics show that the housing market has bounced back since the recession, and is on its way to becoming more stable, a better investment, and time to buy into it.
During 2012 interest rates saw record lows, interest rates are expected to raise slightly in 2013. “Greg McBride, Senior financial analyst with Bankrate.com, says he wouldn’t be surprised if rates hovered between 3.5% and 4% for much of the year, barring any bit changes in the overall economy. The Federal Housing Administration one again increases its one-time upfront mortgage insurance premium for minimum down-payment loans (less than 5% down) to 1.75% of the loan, while raising its annual monthly premiums to 1.25%.” The Solvency Act of 2012 gave the FHA authority to raise premiums to as high as 2.05% annually to build and maintain tis reserves. “If that happens, the increase would tack an additional 133% onto the monthly payout for a $200,000 loan. This small increase in unlikely to deter most buyers from low down-payment loans, which are beginning to become the most popular type of loan. This is because most people don’t have enough cash saved up since the recession, for a conventional loan. This leaves most of the people in the country looking at loan with less then a 10% down payment, also leaving there options limited.
To determine how the housing market is going to react most people are looking at the rest of the economy before making a judgment. There has been economic improvement, “the unemployment rate, for example, dropped to 7.8% from 8.2%. There was also a decline in

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