House Prices and the Wider Economy

In 2007, the world banking crisis began following incredibly irresponsible lending in the US housing market. The practice of lending was called ‘sub-prime’ lending, meaning that banks were lending to ‘sub-prime’ borrowers, i.e. those who were unlikely to have the income to pay their mortgages. This was OK for a while, especially for the bank bosses, who received huge bonuses for their irresponsible risk taking.

But as soon as house prices stopped rising, negative equity levels rose sharply, leading to repossessions and huge losses for banks. Even banks who hadn’t been heavily involved with this type of lending felt the effects as the major world banks relied heavily on each other for funding.

The crisis quickly spread to the UK and across the world. Even though the banks were bailed out through billions of pounds of taxpayers’ money, they have continued to be reluctant to lend to both people seeking mortgages and businesses alike. Why? Because they have become more afraid of risk and have had to build up their reserves to protect themselves from future liquidity problems.

The UK government has been claiming that they will reform the banks and get them lending more again, but three years later little action has been taken. By December 2008, house prices had fallen by a record 16.2% compared to December 2007.

The fall in prices wasn’t just because fewer people could get the mortgages they required in order to buy a house, but because house prices are closely linked to the wider economy for a number of different reasons.

Interest rates are one important factor in determining house prices with revolution shopping. The Bank of England sets a base rate which banks tend to follow when lending to individuals and businesses. And when the economy fails, as it did so dramatically when the banking crisis hit, the Bank of England is likely to decrease its base rate to encourage borrowing (as it is cheaper) and discourage saving (as the rate of return is lower), with the central goal of boosting consumption and the housing market.

This happened in December 2007 – but notice the date – as mentioned above, house prices fell dramatically from this point. Two key reasons were given for the ineffectiveness of the Bank of England’s actions. Firstly, the Bank of England responded too late, and secondly, as mentioned earlier, the banks rely on each other for funding.

They have their own interest rate at which they lend to each other, called the LIBOR. Unfortunately, because the banks remained cautious about lending to each other, the LIBOR remained high, so any money they lent for mortgages cost more for them to get in the first place.

Another factor affecting prices is consumer confidence. When the economy is weak, confidence is low – people worry about their job security and their income falling and consequently are more cautious about spending and borrowing. With fewer people borrowing a mortgage, demand falls in comparison to supply and house prices fall.

In addition, the ratio of income to house prices is another factor. House prices became very high in relation to average incomes in the UK, and they are still considered too high. The fewer people that can buy properties, the lower demand is, meaning house prices should readjust and fall.

Expectations of house prices also have an influence. As the economy has been weak, people have had lower confidence in the housing market and have therefore delayed buying property, expecting that they will be able to get a cheaper price if they wait. This, again, limits demand and prices.

Following a brief recovery in house prices between mid 2009 and mid 2010, prices have began to fall again, prompting fears of a stagnating housing market for many years to come. With house prices being so closely linked to the economy, could this indicate something worrying about the economy – are we in for a double-dip recession?

The London Property Buyers are a family business based in London, which help you Sell Property Quickly.

Home Selling and Buying Tips

At the best of times buying a home can be a very difficult, long, and complicated procedure, and it is of key importance to be prepared. Knowledge is power in being able to navigate the sea of home prices, mortgages, and interest rates. At Wildomar Real Estate we know there are many factors to consider before buying a home. By gathering as much information as possible before you start, you will be in a better position to shop for a home.

Looking beyond the interest rate is of vital importance when you wish to secure a good mortgage loan. Make sure that you have read the fine print and that you are aware of what the true cost of the loan is. Sometimes you are presented with an interest rate that is too good to be true. In this case, it usually is. It can be that the interest rate is due for a sharp increase or that it is only guaranteed for a small period of time. As your mortgage is possibly one of the most important contracts that you will ever sign, having a good real estate agent is crucial in guiding you through the process of getting a loan, and with Wildomar Real Estate you will find the best quality and experience to help you.

Whether you are planning on staying in the home for only a couple of years or well over a decade, Wildomar Real Estate will find the right option for you. Because for a first-time buyer there can be a lot of hidden pitfalls, it is crucial to have an estate agent at your side with an understanding of hidden costs, making sure that charges are legitimate and assisting with other industry concerns.

If, on the other hand, you are intent on selling your home, Wildomar Real Estate will find the best buyer for you. Even though the real estate market has slowed in recent months, we still have buyers eager to purchase your home. Wildomar Real Estate has the experience to help your prepare your home for sale and incentives you can offer the buyer. Ensure that all minor repairs on your property have been made, since the buyer viewing your home will assume that if small repairs have not been addressed, there will also be larger problems. Consider having your home staged by a professional.

Increasingly, home staging has become critical in the process of selling your home. Making sure that your home has had all personal objects and clutter removed will help the buyer imagine themselves in your home. At Wildomar Real Estate we can help you set realistic expectations for selling your home. Buyers are aware that you wish to sell your home, and if you price your house too high, the buyer will know.

In a slow market it is crucial to get a professional real estate agent with suitable experience to help in buying, preparing, and selling your home.

Are you looking for more information regarding Menifee and Wildomar California Real Estate? Visit www.menifeecarealestate.com today!

Unrealized Cost of Home Ownership, First Time Home Buyers Should Be Aware Of

Home ownership is a wonderful thing and after all home ownership is the American dream. However the true cost of home ownership is much higher than first time home buyers typical think and they end up being very surprised 99 out of 100 times. For this reason I have laid out the facts about what the extra costs of home ownership are so when you due plunge into the real estate market you are truly prepared.

• First and foremost your utilities bills are typical much higher than where you are currently living. For example as a home owner you now have water bills which can be very expensive in some communities. Your electric bill will be higher since in an apartment there are owner meters but now you’re the owner and responsible for all electricity on the property. Typical renters who become buyers don’t really take into consideration that their utilities will basically double since homes are typically larger then apartments and the added utilities they haven’t paid before. If you are paying $300 per month now I would assume at least 50% higher utility bills so $450 However a far better guess would be $600 per month.
• Taxes and insurance bills increase constantly just about every year. So when you actually figure out your principal, interest, taxes, and insurance keep in mind the taxes and insurance will increase, and recently insurance costs have skyrocketed with no stop in site. Also in today’s economic marketplace where towns and cities are hurting financially who do you think they charge first? You guessed it the home owners in the town or cities.
• In most cases you have to pay PMI or private mortgage insurance when you don’t put down 20% on a property. These rates are going up all the time also.
• When owning a home maintenance and repairs are unavoidable even on new construction homes. First time home buyers always underestimate or don’t take into consideration this expense. I have owned houses that have cost me about $1,000 per month in repairs or maintenance and some that are maybe $150 per month depending on condition and maintenance required but I guarantee it won’t be anywhere near $0 per month. So please keep that in mind. However you must also be prepared if a major item like a heater, water heater or roof went this can be very detremental to your wallet.
• Misc fees occur like trash in some towns, permits (fire, home-improvement, party, etc.), snow plowing, vandalism, and on and on. All these things add up that renters typically haven’t experienced before.

Don’t be deterred, home ownership has many benefits just want first time home buyers to be fully aware that when you buy a home not all the costs are typically apparent if you have never been down that road before.

Chuck Barnes owner of http://lifeguardrealtyinc.com Since hiring a buyer’s agent is so important I would like to help you find one. If you are in Eastern Mass you can contact be directly at chuck.barnes@lifeguardrealtyinc.com. If you are located anywhere else in the United States contact me at http://lifeguardrealtyinc.com/buyersagent

Buying and selling homes online

The real estate industry has changed a lot over the years. With so few buyers around, it’s not as easy to sell a house as it used to be.

With today’s cooling housing market, a lot of Americans realize that they have to work hard at selling their property. Buyers now are more savvy and are really taking their time to figure out the real value of the property.

Nowadays, the traditional ways of putting a house up for sale may no longer work. Sellers must be more imaginative if they want to attract buyers to look at their properties.

One of the ways by which a seller can dispose property is to skip going through financial institutions. Instead of using the services of banks, a seller may opt to receive the monthly payments directly from the buyer. The same seller receives both the principal and interest with a mortgage constituted on the property for sale as security.

The above scenario may actually turn out to be beneficial for both the seller and the buyer. In this situation, a seller gets to keep the property in case the buyer cannot complete the payment.

Another option is for the seller to enter into a rent-to-own or lease to purchase option. Under this arrangement, the owner allows the prospective buyer to occupy the property in return for a monthly payment until such time as the buyer can purchase the property.

There are also companies that specialize in the acquisition of properties. Because these companies pay in cash, they usually are able to get the property at a discount. This may be a good alternative for sellers who are in the hurry to sell their properties.

There are many other ways by which a seller can sell or dispose of his property. However, with the crash in the prices of real estate, any seller must act fast.

Dan Sawyer has be posting articles about buying property online for the past four years. Additionally, Dan enjoys writing about New York City neighborhood subjects, such as Fresh Meadows apartments and Rego Park real estate.

Buying Your First Home – The Often Overlooked Factors

When buying your first home there are many factors involved, and most people find themselves so deeply entrenched in the struggle between what they want, and what they can afford, that they often downplay the importance of a few very important decisions.

There’s one major factor one needs to determine when buying a home which first-time home-buyers often overlook, and that is the WHERE factor. It seems obvious enough, but often new home buyers are so caught up in price, that they discount other important aspects of the decision-making process. It’s all fine and well to get that extra bedroom, or upgraded furnishings, but after a few weeks of a painfully long commute some often find themselves cursing their location choice. It’s a huge investment of time and money, and it only stands to reason that one should find the happiest median. Consider amenities as well; properties closer to the center of the community tend to be more expensive, but the trade-off is the convenience of having most amenities at your fingertips. For planning a family, be aware of the positioning of schools, medical facilities, and other such important locations.

Also thoroughly consider property type. Although many of us grew up with plenty of yard space, you may find based on your current lifestyle that a condo or townhome is the better choice. Take a look out your window on a January day in Toronto, and one is very quickly reminded of the joys of shoveling a heavy snowfall. Backyard BBQ’s are great, but caring for a larger lawn can be very time consuming and costly.

Of course staying within your limits as far as price is concerned is still the most important factor when searching out the ideal first home. We need not be reminded that the state of the US housing market is largely a result of irrational home buying decisions, not to mention lending decisions. The Canada Housing and Mortgage Corporation has some financial worksheets on their site to assist home-buyers with calculating where they should be in regards to monthly mortgage payments. Choose your location with your head, and not your heart, and you’ll find it’s less likely you’ll question that decision later

Sayra Bidani www.condominiums.ca