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Below is a copy of the articles that appear in this weeks ezine newsletter. This is a weekly newsletter that is e-mailed to you! If you would like to receive a copy of this newsletter just fill in the form below and you too will receive this very informative newsletter!
With all the talk of the burst of the
housing bubble ...........
What Really is a "Bubble"?
Bubbles characterize all asset markets. A bubble is an irrational over-investment in one particular sector or economy. But what is particularly interesting about property markets is that its cycles, its bubbles and depressions are (unlike the stock market) so smoothly predictable.
 Over-valued property markets are extremely seductive. There are often good reasons to believe that a particular market deserves higher valuations than it did in the past, or than other markets deserve. And sometimes (to make matters more complicated) these arguments are right.
Real estate markets tend to fluctuate between undervaluation and overvaluation. What is 'high' for a market, and what is 'low' is largely a matter of history, and of comparison with other assets.
What is really most important to realize is that this housing market will rebound like all others have in the past. The American dream is still alive and well and owning a home is one of the biggest parts of that.
Looking Back on 2009
 Throughout 2009, interest rates continued to stay low, setting records as they fell against speculation. Low priced foreclosures and the high inventory of homes on the market brought prices down to, dare I say, affordable levels. Even the luxury home market saw steep declines as sellers of luxury homes began driving their prices way down - some with price reductions in the millions, yet sales continued to drop throughout 2009. Then the Fed stepped in and passed the $8000 tax credit for first-time homebuyers. Soon, home sales shot straight up to their highest levels in more than two-and-a-half years.
The impact these significant events will have on 2010 has yet to be seen. With the tax credit extended and expanded, the hope is that 2009's momentum will carry into next year, and the real estate market can continue to aid in our country's economic recovery.
A Shift in Payment Priorities
According to the article, a study released by Transunion showed that Americans are increasingly more likely to make payments on their credit cards before payments on their mortgages. The data shows that roughly 6.6 percent of borrowers paid credit cards first in the third quarter of 2009, up from just 4.3 percent in the first quarter of 2008.
This is a shift in the historical norm; which has long been slanted toward house payments as a priority ahead of other bills. Credit the housing bust nationwide for the change.
As homeowners struggle with unemployment and drops in their homes’ value, they have perhaps become reluctant to commit more money into an asset that might not be worth what they owe on it. Whereas keeping up with credit card payments continues to give them access to necessities such as gas, clothing and groceries.
It also probably signifies part of the issue that caused the housing bust. Access to no-money down or low-down payment loans that proliferated the market during the housing boom allowed buyers to get into homeownership without much “skin in the game.”
In the days of 20-percent down payments, homeownership was something you worked for, saved up for and therefore something you were less likely to give up so easily. It’s a lesson that you can bet banks are heeding.
Featured Article Still Part of the Dream?The U.S. Census Bureau recently revealed that home ownership in the fourth quarter of 2009 had dropped to 67.3 percent, about the level before the housing boom the nation experienced early in the past decade.
The percentage of home owners reached a peak of about 69 percent in 2004, during the height of the housing frenzy. It started dropping in 2006, as homes began being lost to foreclosure.
So the question:
Is home ownership still part of the American dream? Where do you land on that important question might depend on whom you listen to. Many “experts” are saying that home wnership is overrated, and most people should be renting. Congressman Barney Frank, Financial Services Committee chairman, recently said that lower-income Americans should probably rent, not buy, their homes.
While Frank’s comment was made in the context of criticizing the government’s push for – and subsidies of – home ownership for everybody, a philosophy that probably led to the subprime mortgage mess, it’s not a comment that’s going to sit squarely with everyone.
Let’s face it, despite the declining number of home owners, more than 2 out of every 3 American adults fall into that group. Two out of three of us must consider it part of the dream, because as even as it becomes increasingly difficult to maintain ownership – unemployment, foreclosures, etc. have taken their toll – only a small percentage of us are readily giving it up.
Is home ownership for everybody? Probably not, as the big push for home ownership for all helped get us into a recession. But as the debate rages on about how involved the government should be in providing home ownership opportunities, let’s not just chuck away home ownership’s role in the American Dream.
Sure, there are financial advantages to owning a home. Tax breaks and equity build-up, for example. Paying rent gives you neither. But there are other components of home ownership with value that can’t be measured in dollars and cents.
There is a social component of owning your own home. Pride of ownership, while an abstract concept, has merit. The feeling of being part of a community, a school district, is rewarding to many. Home owners also enjoy freedoms that renters do not.
If you own your own home, you can paint the walls pink if you want. Have a dog. Blast your stereo at 2 a.m. You don’t answer to a landlord.
Does home ownership make 100-percent sense for everybody? No. Has pushing it on those who are not ready caused problems? Yes.
But no matter what the “experts” say, no matter how many have somehow decided home ownership is less desirable than it used to be, it remains part of the American Dream.
Recommendations & Resources Rent vs. Buy A real estate agent worth his or her weight should be able to help you figure out whether renting or buying makes financial sense for you. Each person’s situation is different, and should be considered carefully with a professional. However, for a quick, online general assessment you can visit Ginnie Mae’s “Rent vs. Buy”calculator. http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?section=YPTH
We are located at 31832 Delhi Road, Brighton, IL Minutes away from Alton, Jerseyville, and the soon to come 255 by-pass. We are just 30 miles north of downtown St. Louis. We look forward to providing the Metro East area with honest and reliable service!
Lesley Gleason, Managing Broker, e-PRO
Thank you for stopping by our website. If you have ANY questions, please give me a call at (618) 372-4010!
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