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Another Drop In Value Headed For Property?

Todays Date: August 16, 2017

Just like a ride at an amusement park that slows down right before plunging to the steepest decline in the ride, our real estate market may be headed for a similar sudden decline following a small recovery of its 2008 declines.

A trio of gathering government storm clouds will be responsible for the drop that some predict could mean another 10% to 15% slump in prices, they say.

Here it is three years after the peak and it’s still all about housing, said David Rosenberg, an economist at Gluskin Sheff & Associates in Toronto. The outlook for the market is extremely clouded.

The function of the FHA is to make sure those who would not normally be able to buy a home, can do so, but they are raising their standards which will make buying a home harder for poorer buyers.

Using the huge number of loan defaults, the FHA reasoned that raising the required down payment for buyers with the lowest credit, increased the PMI premiums for its loans, and reduced the amount of seller pre-paids and closing costs allowed.

With fewer people having high enough credit for standard loan programs, more people have turned to using FHA backed financing to get their loans done.

Due to these trends many borrowers are considering the FHA as their only source available for financing their home purchasers, which means the government will be backing even more loans than the already burdened Fannie Mae and Freddie Mac do. A lot of people who can’t get loans from the FHA will have nowhere else to turn.

FHA programs do not seem to be fading in their role in the real estate market, despite the higher requirements to get one now. First time home buyers and people with lower credit would not be able to buy without similar programs.

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