• Lisa Simpson
• Jul 2,2010
• In: Foreclosure

The Pros and Cons of Residential Markets

The pros and cons of residential markets bouncing back without further assistance are being considered and debated.

Colleen Wells had heard that the markets are once more picking up and this prompted her to put her farm (60 acres) in Ocala, Florida for sale earlier this year. But when there were no takers for her initial asking price of $894,000 she cut it down to $699,000. But despite the slash she has yet to get any response.

The experiences of Wells are giving out reminders that despite signs of improvement the recovery has not yet reached firm ground. The year however is ending on a brighter note since it started. Prices of houses have picked up since the last two years. The inventory of unsold houses is the lowest since a year. The fall in prices is at a tardier pace as compared to this time in 2008.

But experts are warning that the improvement is linked to the assistance offered by the government – low interest rates because of the buying of mortgage securities by the Federal Reserve and tax credit of $8,000 for first time nest builders. The assistance programme has been extended and expanded.

The economy continues to be weak with unemployment at 10% posing the question whether the housing market can turn around from the worst shock since the time of the Great Depression without further governmental assistance. The buying up of securities plan by the Feds involving $1.25 trillion is scheduled to close early in 2010.

The chief economist of National Association of Realtors Lawrence Yun said, “We’re on the cusp of a self-sufficient recovery, but we’re not there yet.” Mark Zandi of Moody’s Economy opines that the housing market would get worse before it got better.

The median housing price as already decreased by nearly 30% from the peak of 2005. Zandi apprehends further fall in the coming year when prices would skid to a bottom and slowly make a comeback to the median price of the nation of the previous quarter – $170,000 in 20102. Meanwhile the foreclosure numbers would increase to 1.9 million in 2010 exploding the expected total of 200,000 of the current year. Zandi commented, “Foreclosures will be high for a long time. And property values won’t increase.”

But some economists are optimistic. Brian Bethune of IHS Global Insight said that over the coming year or two the prices might inch upwards and then later pick up speed and start jumping up.

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