After close to four years of sputtering, the real estate market has begun showing some light. 2012 was regarded as the year when housing bounced back and this is because home prices eventually bottomed out. It was estimated that U.S homes would gain more than $1.3 trillion in value by the end of 2012. Considering that more than 1.3 million homeowners in US are struggling with negative equity, the housing prices brought some relief to the owners.
This trend is expected to spark more home sales and those homes, which are not trapped in mortgage, are likely to sell easier. Due to the low home prices, which were witnessed in the last four years, there was a fall in for-sale inventory of homes to 43 percent. Although the sharp decline in for-sale inventory was a crucial correction to the oversupply of homes especially after the effervesce instability in the real estate market, however, with home prices now increasing there is likelihood of notable changes in demand for the homes.
The rising prices are expected to lead to more inventory because investors are getting encouraged by the souring prices to construct new units. In addition, the rising prices are encouraging homeowners to sell their units thus pulling up the inventory. With more inventories, it means that buyers will have more homes to choose from. The huge price declines, which were witnessed up to 2012, as well as the low record mortgage rates in the same years made owning homes to be easier.
In fact, due to these factors, it was estimated that owning a home was cheaper by 45 percent than renting. Although the Consumer Financial Protection Bureau intends to make an announcement for new mortgage rules that are aimed at defining which mortgages are beyond the ability of borrowers to repay, there may be issue with refinancing. Today, the mortgage rates are at low levels and refinancing borrowers could even enjoy lower interest rates by refinancing.
The intended cut in mortgage interest deduction by the federal government where it plans to spend more than $100 billion per year will help narrow the federal budget deficit but this also has an implication on the expanding refinancing. Reducing the mortgage interest deductions will mean that owning a home will be expensive and this could reduce the home values.
The window for affordability of homes is vanishing away and at the same time, there is increased refinancing. As the US Federal reserve plans to spur mortgage activity in its economic recovery, this is likely to result to low mortgage loan rates and it would make it more convenient for borrowers to refinance. Refinancing is expected to increase as people seek for lower interest rates on their mortgages something that will help improve their cash flows and help repay their mortgages with comfort.
Considering that millions of Americans are “underwater” and are faced with problems of owing more on their mortgage loans than their homes, it means that they would appreciate any deal that could enable them make lower monthly repayment. With the extended government programs, which are aimed at creating a better borrowing environment, coupled with the low mortgage rates, perhaps refinancing will become simpler and beneficial for many homeowners who are struggling in repaying their mortgages.