Monday, July 7, 2008

Analysts See a Housing Market Rebound

According to this article, due to the combination of fewer new houses being built with an increase in the number of buyers who can afford to buy one (lower prices = greater affordability), within three years we should see a bounce back of the housing market. Lower prices create greater demand which creates higher prices. Good ol' supply & demand - never fails.

On the other hand interest rates are steadily increasing (up to about 6.25% for a 30 year fixed today) and if that continues, this forecast might be a bit optimistic. (So as to not lose perspective, rates were 6.125% a couple of years ago - we just had a nice dip this past winter.) As federal attention shifts to bringing down the price of oil, the bond market could continue to suffer and who knows how high rates will go. The increase in rates could offset the attractiveness of home ownership for buyers in certain areas so we'll see how things go.

In the meantime, here is an interesting analysis of what has been happening in Portland's market. We haven't suffered as badly as some, with any luck we'll snap out of it sooner too!

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10 comments:

The cup is half full of something I don't like said...

unfortunately most people who are surprised by their mortgage didn't really even bother. It is shameful how many people made such a huge decision without understanding it.

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Because house prices will keep falling in the areas where prices are still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with 20% downpayment. Landlords say a safe price is a maximum of 15 times the house's annual rent. Yet in affluent areas, both those safety rules are still being violated and there is still a huge housing bubble. Buyers are still borrowing 6 times their income and putting only 3% down, and sellers are still asking 30 times annual rent, even after recent price declines. Renting is a cash business that proves what people can really pay based on their salary, not how much they can borrow. Salaries and rents prove that those high prices will keep falling for a long time. Anyone who bought a "bargain" in those areas last year is already sitting on a very painful loss.

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Hannah said...

You did a very well job, I had so much fun reading the great article in your blog.I think the prices of homes nowadays are increasing.

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Brandon said...

Your blog post is very interesting.It gives us ideas on how to deal with this kind of topic.People should know and understand what they are doing to have a good decision.

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