When will the housing market turn around?

Answer 1

There is no end in site for the recovery of the U.S. housing market. There is also no data to back up a claim that an end is near. A larger wave of loan defaults, primarily Alt-A, Interest Only and Pay Option Arms are due to re-set and will hit the market at the beginning of 2009. These will combine with the existing 'Sub-Prime' foreclosures that have driven the market down for the last 2 years and will create a correction that has never been seen in this country. Although these new defaulting loans were never really called 'sub-prime' they were actually some of the most toxic loans originated and were generally for higher values than traditional sub-prime. The government will continue to throw tax-payers money at financial institutions as if to prove they are doing something, but it will merely drain the countries resources as home prices spiral down, causing many more problems. Many 'Prime' homeowners will quit making their payments when they finally crunch the numbers and realize they are throwing good money after bad. Making payments on a $500,000 mortgage when their home is worth $350,000 is a hard thing to keep doing. Throw in a loss of a spouse's job and it is no longer an option. The market correction will serve a purpose, as homes will finally be affordable to the average buyer utilizing conventional financing predicated by conventional lending guidelines.