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Real Estate Market

Nearly everyone is talking about the real estate market. Turn on any newscast and you're certain to hear a tragic story of a family who has lost their home to foreclosure. Switch to late night TV and you're certain to see an infomercial showing how to capitalize on distressed real estate. Flip to cable and you'll find a dozen shows about house flipping, creating curb appeal, or selling mega mansions in Beverly Hills or Malibu.

The million dollar question is what's really going on in the real estate market? Unfortunately, the answers are clear as mud. The National Association of Realtors reports a continual increase in buyers purchasing previously owned homes. NYU's Stern School of Business claims the rise stems from the federal housing tax credit offered through first time home buyer programs. Both agree housing sales will decline in the coming months

As unemployment rates continue to rise in states such as California, Nevada, Arizona, Michigan and Florida, mortgage financiers expect to see upwards of two million more foreclosures by the end of 2010 and forecast another million by the end of 2011. Current estimates show over six million foreclosures have already occurred. If these predictions are correct, over nine million homes will fall into the category of bank owned homes.

As more homes fall into foreclosure, housing prices will continue to plummet. Homeowners who want to sell their house will be forced to lower the purchase price in order to compete with low-cost bank owned properties. Declining property values cause homeowners to lose accrued home equity, which can subsequently prevent them from entering into mortgage refinance to obtain a lower interest rate.

Stricter banking regulations have made obtaining a home mortgage loan nearly impossible for anyone with credit scores below 700. Mortgage lenders cannot afford to accrue more properties due to borrowers defaulting on their loans. However, a few options exist for borrowers with bad credit.

Fannie Mae offers the Home Path Mortgage program which encourages buyers to purchase bank owned foreclosure homes. Many local and nationwide lenders offer financing for Home Path Fannie Mae properties which allow borrowers with less than perfect credit to buy a house with a low down payment and flexible mortgage terms.

Investors who buy homes often find it frustrating to bid on short sale and bank owned properties because of lengthy delays. While the number of short sale approvals has increased, banks have made it difficult for investors to quickly close real estate deals. Many investors find the process of working with lenders to purchase distressed properties more trouble than it's worth.

The truth of the matter is overzealous lending practices played an integral role in the demise of the real estate market. When banks collapsed, unemployment soared; leaving millions of borrowers unable to afford their mortgage payment and millions more owing more on their home loan than their house is worth.

There is no one-size-fits-all solution to fix the problem. However, the old adage of, time heals all wounds, may hold true. With enough time, the real estate market will rebound, but no one knows how long it will take or how many more homeowners will lose their home to foreclosure.

Those who are considering buying a home must take time to conduct due diligence. Research housing prices in local markets through Realtor.com. Read real estate publications and stay abreast of business news. Attend real estate clubs and talk with local investors, mortgage brokers and realtors.

Whether you want to buy a house as your primary residence or investment property, it's always good to know as much about real estate market conditions as possible. At Simon Volkov, we take pride in providing current real estate and personal finance information to help visitors make informed choices. Begin your learning experience by browsing our real estate market library and subscribe to our mailing list to receive notification when new articles are published.