The effects of the US housing crunch have wide-reaching implications that may take some time to correct.
In its aftermath, thousands of homeowners have been displaced from their homes by the tide of foreclosures, and many private home lending firms have either closed shop, or filed for bankruptcy claims these days. The South Florida region has been one of the worst hit zones in the country, and regulators, lenders as well as politicians have enacted measures to aid distressed homeowners and lenders as well, to help cope with the rise in mortgages and the dearth in the sale of new homes.
What The Economic Stimulus Package Aims To Achieve
One plan, which is a clause in the economic stimulus package approved by Congress early this year, aims to slightly boost the sale of homes in South Florida’s currently stalled housing market., . This provision aims to temporarily raise the limit for so-called “conforming” loans from $417,000 to up to $729,750, especially in high-cost areas like South Florida. The conforming loans are those that can more easily be bought and sold in the secondary market, and conforms with the lending guidelines of agencies like Fannie Mae, which is the largest source of mortgage capital in the U.S.
Among the aims of the plan is to loosen credit, which would make it easier for homeowners or prospective home buyers to qualify for larger loans at lower interest rates. Home buyers who are seeking mortgages over the $417,000 limit before had to opt for second mortgages or so-called jumbo loans, which carried higher interest rates and required larger down payments. The US Treasury Department also announced a few months ago that a loan modification plan, called Hope Now, is aimed to assist families in avoiding foreclosures. The plan encourages lenders to modify mortgages, which helps to make the monthly payments more affordable to owners, who are at present, struggling to cope up paying.
How The Property Markets In South Florida Are Adjusting To The Slump
Today, most housing industry-sponsored programs usually require that homeowners have sufficient equity in their properties. However, those who purchased homes and condos in the last two years are seeing their equity disappear, as values decline. A lot of buyers are currently stuck, and are owing more money than their homes can sell for, which doesn’t leave them the option to sell.
For example, in the West Palm Beach-Boca Raton area, the median sales price for single-family homes fell by 8 percent, while condos dropped by 25 percent in December alone, as compared to the previous year. The median sales price for houses and condos in the Fort Lauderdale region also dipped by 10 percent and 14 percent, respectively. In Miami, median sales prices also fell by 5 percent for houses and 10 percent for condos, according to the Florida Association of Realtors (FAR). Some property market observers forecast that home values in some areas of South Florida will decrease by another 20 percent before seeing the prices fully stabilize, and property values could fall by $79.9 billion statewide this year, according to industry analysts.
The U.S. Department of Housing and Urban Development has yet to ascertain the median home price to guide the proposed law. According to the FAR, the median sale price for single-family homes in December was $380,100 in Miami, $367,600 in Fort Lauderdale and $368,200 in the West Palm Beach and Boca Raton area.. At present, jumbo loans are not backed by Fannie Mae and Freddie Mac, therefore home borrowers would have to pay an interest rate 1.5 percent above their rates to help offset the added risk private lenders take on.
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