The credit crunch during the recession has greatly affected the housing sector. As such, about 16% of all homeowners had higher mortgages than the value of their homes, translating to 12 million distressed homeowners by the time the recession ended. It was the worst time for the economy and luckily, things are getting better for the housing industry.
Today, the increasing home prices has resulted to with fewer delinquent homeowners – but that’s not purely good news. This is because the only reason for the decrease is the fact that the homes have been foreclosed or sold. Lenders of bad credit loans also contributed to fewer mortgage defaults because they provide non-discriminatory solutions to financial problems.
Rising Home Prices and the Housing Market Recovery
According to real estate broker CoreLogic, the prices of homes climbed more than seven percent in November 2012. That is the biggest leap seen since 2006, when the sector was on the verge of hitting its then-highest point.
Investment bank JPMorgan Chase & Co. (NYSE: JPM) said by 2015 the number of distressed homeowners facing foreclosures could go down to 4 million. But the number only represents the families that can avail of loan services covered by banks to pay for mortgages. A bigger decrease is actually expected with the mushrooming of non-traditional loans also offering mortgage services too.
Experts say that a recovery in housing is likely to trigger a rebound in home prices to pre-2008 levels. The lower supply of homes due to fewer foreclosures and the availability of bad credit loans is pushing prices higher. Consumer confidence has improved and lower interest rates are creating more demand in the industry. With a return to normalcy in housing, the economy is poised for a turnaround, reinforced by more jobs and improved consumer spending.
Increase in Prices to Continue in 2013
A home price appreciation is expected to continue well into 2013. Economists report that a progressive stabilization of home prices is forecasted, though the industry is still off the mark in comparison to the 2005-2006 figures.
Housing stocks are also projected to rally this year, since home sales are on the rise. Last year, home sales went up by 6% to 4.2 million – the first time since 2005. This steady market movement was capitalized by private investors who had bet on a full recovery in housing by 2012. They reeled in significant add-ons to their shares and if homebuilders maintain their earnings this season, those payoffs are anticipated to continue.