Driving up and down the streets of any American neighborhood, you can see the affect the credit crunch is having on the housing market in the USA. Dozens of homes in each neighborhood have for sale signs in front, with no evidence of life inside. The number of people facing property repossession is increasing at an alarming rate due to sub-prime lending which began in the late 1990's, and continued through into the early part of the new millennium. Add the adjustable "teaser" rates of mortgages to an already volatile post 9/11 economy, and there had to be an inevitable crash landing for the average consumer.
Homes are depreciating in value at a rapid rate. A home which was purchased brand-new in 2002 for $260,000 in certain parts of the country were selling for around $180,000 in 2007--almost a $100,000 depreciation over the course of five years.
People who signed mortgage papers for an adjustable rate mortgage in 2002 were under the impression they would be able to refinance in a few years' time to "lock in" their mortgage rates are finding themselves in an ugly predicament. They can no longer refinance their homes, as the depreciation in value has made it impossible for banks to be able to agree to a refinance dal. Before they know it, rates on mortgage loans are adjusting, and people's mortgage payments are more than doubling as they adjust paying back their loans. More and more people are struggling just to make ends meet. Because record numbers of borrowers are unable to meet payments on their adjustable rate mortgages, more and more Americans are finding themselves in a housing crisis.
Banks are foreclosing on homes everywhere you look, and they are finding they are holding notes to worthless loans. The collapse of many financial institutions because of the reckless lending and borrowing practices was inevitable. Once the economy evens out, the housing market should begin its gradual upward ascent again. It may take decades for people to feel secure enough in the banking industry to take on new mortgage loans, and the housing market will suffer for a while.
Inevitably, people will always need places to live. They will always want to carve out their own little nest, so the housing market will not be negatively affected forever.
Homes are depreciating in value at a rapid rate. A home which was purchased brand-new in 2002 for $260,000 in certain parts of the country were selling for around $180,000 in 2007--almost a $100,000 depreciation over the course of five years.
People who signed mortgage papers for an adjustable rate mortgage in 2002 were under the impression they would be able to refinance in a few years' time to "lock in" their mortgage rates are finding themselves in an ugly predicament. They can no longer refinance their homes, as the depreciation in value has made it impossible for banks to be able to agree to a refinance dal. Before they know it, rates on mortgage loans are adjusting, and people's mortgage payments are more than doubling as they adjust paying back their loans. More and more people are struggling just to make ends meet. Because record numbers of borrowers are unable to meet payments on their adjustable rate mortgages, more and more Americans are finding themselves in a housing crisis.
Banks are foreclosing on homes everywhere you look, and they are finding they are holding notes to worthless loans. The collapse of many financial institutions because of the reckless lending and borrowing practices was inevitable. Once the economy evens out, the housing market should begin its gradual upward ascent again. It may take decades for people to feel secure enough in the banking industry to take on new mortgage loans, and the housing market will suffer for a while.
Inevitably, people will always need places to live. They will always want to carve out their own little nest, so the housing market will not be negatively affected forever.
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