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Saturday, January 30, 2010

Is The Ugliest Emerging In The Real Estate Industry?

By Gavin J. King

Like a carnival free-fall ride that stops suddenly, teasing riders into a false sense of safety before plummeting the rest of the way to the ground, some economists say the housing market could once again be headed for a plunge after slowly clawing back some of its 2008 losses.

It is rare that a combination of government factors depresses the real estate market, but projections indicate a slump of 10-15% in prices may be coming our way.

After a 36 month departure from the peak of the real estate market, the topic is still real estate and the current trend in prices. The news is not good and may signal the end to the brief period of appreciation we had in 2009

The first shoe to fall was last week's Federal Housing Authority announcement that it would tighten its loan standards in light of defaults that had pushed the agency's reserves well below its mandated level.

Using the huge number of loan defaults, the FHA reasoned that raising the required down payment for buyers with the lowest credit, increased the PMI premiums for its loans, and reduced the amount of seller pre-paids and closing costs allowed.

Conventional loan programs are having a hard time placing loans with qualified borrowers, who are turning to FHA financing for easier loans

Due to these trends many borrowers are considering the FHA as their only source available for financing their home purchases, which means the government will be backing even more loans than the already burdened Fannie Mae and Freddie Mac do. Being forced to utilize FHA type loans, many buyers are finding a great resource in them in a time when conventional loan money is more than difficult to get. - 23305

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