Effects of Recession in the US Real Estate Market 2010


By Belinda Dawson
The credit crunch and the great depression of 2007 has played a negative role in the US real
estate market. The housing market is still on its way to recovery from the recession.

Effect of recession in real estate market

From the very past the US real estate market has played a very important role in giving a shape
to the usage of urban land. According to the principles adopted, it gave the owners the opportunity
to earn maximum value for his land.

But the recession of 2007 has led to unemployment, and as a result, the demand for house has lessened
and new constructions have also become very few in number. Though many first time home buyers are there
in the market, but, the fewer number of sellers could not meet the buyer's demand. As a result, the profit
decreased, price of inventories increased, sales went down and the US real estate market has faced
an incredible number of foreclosures. According to the National Association of Realtors (NAR), the number
of homes that received foreclosure notices in 2009 is 3 million.

Recent situation in the real estate market

To make up for the loss, the government has introduced option ARM, by which the home buyers can choose
how much they want to pay each month during the 'start period' of the loan. They have the choice of paying
from the following options:

-a 30-ear fully amortizing rate
-a 15-year self amortizing rate
-interest-only payment
-a base rate ( which does not cover the monthly interest costs)

This offer, along with unemployment rate of 10.5% in 2010, will make more and more homeowners unable to
repay their mortgage.

The loan modification program of the government has can also cause home prices to fall by 5% to 10%, prior
to the stabilization of the real estate market. It is predicted that the market will have a noticeable
rebound by 2013.

The government's offer to extend $8,000 for first time home buyer tax credit till the middle of 2010 and
expansion of the program to include $6,500 credit for non-first time home buyers will attract more home
shoppers into the market.

Already the US real estate market is showing signs of stabilization in demand and price. For the last
6 consecutive months, the home prices are on a rise. The market has already started to recover from the
effects of recession, but, it will need some more time for full recovery. According to a recent survey,
77% of the richest people in the US feel that now is the right time to buy real estate properties, as
the price of home is low. Though the market has suffered a great loss, but the initiative taken by the
US government to reduce the loss is to be appreciated.

Belinda Dawson is a contributory writer associated with http://www.realestateisp.com
and has written several articles for various financial websites. She holds her
expertise in the Real Estate industry and has made significant contribution through her various articles on Real
Estate and topics related to it.

Article Source: http://EzineArticles.com/?expert=Belinda_Dawson



The Journal of Real Estate Finance and Economics provides a forum for the publication of this research.
Coverage includes urban economics, housing, regional science and public policy. Recent times have seen an expansion of theoretical
and empirical research on real estate using the paradigms and methodologies of finance and economics. Examples of this research include
the working and structure of markets, the role of various institutional arrangements, the attention given mortgages and asset securitization,
risk management and valuation, and public policy and regulation.


The Journal of Real Estate Finance and Economics 2010

How Do Institutional Factors Affect International Real Estate Returns?
Analyst Behavior and Underwriter Choice
Tail Dependence in International Real Estate Securities Markets
Fair Value and Risk Profile for Presale Contracts of Condominiums
Disentangling the Short and Long-Run Effects of Occupied Stock in the Rental Adjustment Process
Transparency, Integration, and the Cost of International Real Estate Investments
Extreme Risk Measures for International REIT Markets
Institutional Investors and Firm Efficiency of Real Estate Investment Trusts
Home Price Risk, Local Market Shocks, and Index Hedging
GSE Activity and Mortgage Supply in Lower-Income and Minority Neighborhoods: The Effect of the Affordable Housing Goals
World Ranking of Real Estate Research: Recent Changes in School Competitiveness and Research Institutions
Real Estate Mergers: Corporate Control & Shareholder Wealth
International Real Estate Mutual Fund Performance: Diversification or Costly Information?
REIT Stock Prices with Inflation Hedging and Illusion
What Determines Stock Price Synchronicity in REITs?
Spatial Variation in the Determinants of House Prices and Apartment Rents in China
Estimating Real Estate Price Movements for High Frequency Tradable Indexes in a Scarce Data Environment
Delegating Eminent Domain Powers to Private Firms: Land Use and Efficiency Implications
Market States and the Effect on Equity REIT Returns due to Changes in Monetary Policy Stance
Financial Opacity and Firm Performance: The Readability of REIT Annual Reports
Earnings Conference Call Content and Stock Price: The Case of REITs
Minimum Service Requirements, Limited Brokers and Menuing of Services
Asymmetric Correlation and Volatility Dynamics among Stock, Bond, and Securitized Real Estate Markets
Changes in REIT Liquidity 1988--2007: Evidence from Daily Data



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