The US real estate market has been in doldrums for quite a few years now, but few doubts exist at present that the problems it faces have come to an end. There is no doubt that vacancies of residential accommodation are very high while new construction has slowed down tremendously. This might not seem to be very promising, but it has to be considered in light of the fact that residential property prices in the US are expected to bottom out in the year 2012.
There are indications that the economy will finally improve in 2012, albeit moderately. At the same time, unemployment rates will reduce to a manageable 7.5 percent. According to all indications, the US employment outlook has been improving steadily. These factors indicate that all vacant housing units will find buyers, especially since there will be limited supply of housing units. It will be relatively easy for people to buy affordable homes given that prices will drop from their currently depressed levels.
Another factor that will affect the US real estate market is the rapidly worsening economic situation in Europe. The government has also maintained mortgage rates at low levels. This gives investors greater motivation to buy residential property in the United States instead of making a gamble by taking their money to other destinations.
The US Government is putting a radical plan into effect in order to bail out homeowners who have been faced with immense financial pressure because of the current economic scenario. The Government has worked out a deal with major banks (Bank of America, Wells Fargo & Co, JP Morgan Chase & Co, Citigroup and Ally Financial Inc) whereby they will make a $25 billion settlement over mortgage related problems.
The bulk of this money is to go towards loan modifications for delinquent borrowers whereas part of it is intended for homeowners who have been diligently making their payments but are unable to refinance because they owe more than their homes are worth. A part of the settlement is also kept aside to pay up to $20,000 each to people who lost their homes to foreclosure. Not because they lost their money playing roulette at the local casino, but because external conditions they could not control forced them out of their houses. The need of the hour is more regulation on lenders in order to monitor their practices.
Americans have always liked to own their homes, and it seems very likely that will start buying homes again in the year 2012 because conditions seem very favourable since they point to what might be a sustained recovery. Besides, demand for homes has been artificially suppressed over the past few years because of bad economy. By all indications, Americans, whose appetite for risk have been reduced drastically, will bring their hard earned money to the residential real estate market in the coming year. Like poker the real estate market will not die in the USA.
The opening up of people’s purse strings when it comes to residential properties spells good news not just for the US real estate market but also for the economy as a whole because this will stimulate many industries that provide related goods and services. In other words, it seems very likely that the bad times are finally over.