"following are 7 reasons why the U.S. real estate market is already a total nightmare....
#1) In May, sales of new homes in the United States dropped to the lowest level ever recorded. To be more precise, new home sales dropped 32.7 percent to a seasonally adjusted annual rate of 300,000. A "normal" level is about 800,000 a month. New homes have never sold this slowly ever since the U.S. Commerce Department began tracking this data back in 1963.
#2) The median price of all new U.S. homes sold in May was $200,900, which represented a 9.6% drop from May 2009. If prices are still falling on new homes that means that the real estate nightmare is not over.
#3) New home sale figures for the previous two months were also revised down sharply by the government. Apparently their previous estimates were far too optimistic. But those were supposed to be really good months for home sales with so many Americans taking advantage of the tax credit right before the deadline. So the fact that the data for the previous two months had to be revised downward so severely is a very bad sign.
#4) Newly signed home sale contracts in the U.S. dropped more than 10% in May.
#5) According to the U.S. Commerce Department, housing starts in the U.S. fell approximately 10 percent in May, which represented the biggest decline since March 2009.
#6) Internet searches on real estate websites are down about 20 percent compared to this same time period in 2009.
#7) The "twin pillars" of the mortgage industry are a complete and total financial mess. The Congressional Budget Office is projecting that the final bill for the bailouts of Fannie Mae and Freddie Mac could be as high as $389 billion. Both Fannie Mae and Freddie Mac continue to hemorrhage cash at an alarming rate, but the truth is that without them there wouldn't be much of a mortgage industry left in the United States.
The following are 7 reasons why things are going to get even worse....
#1) The massive tax credit that the U.S. government was offering to home buyers has expired. This tax credit helped stabilize the U.S. real estate market for many months, but now that it is gone there is no more safety net for the housing industry.
#2) Foreclosures continue to set all-time records. In fact, the number of home foreclosures set a record for the second consecutive month in May. Not only that, but the number of newly initiated foreclosures rose 18.6 percent to 370,856 in the first quarter of 2010. A rising tide of foreclosures means that there is going to be a growing inventory of foreclosed homes on the market. As of March, U.S. banks had an inventory of approximately 1.1 million foreclosed homes, which was up 20 percent from a year ago. There is no indication that the number of foreclosed homes that need to be sold is going to decrease any time soon. This is going to have a depressing effect on U.S. home prices.
#3) Another giant wave of adjustable rate mortgages is scheduled to reset in 2011 and 2012. This "second wave" threatens to be as dramatic as the first wave that almost sunk the U.S. mortgage industry in 2007 and 2008. Unfortunately, what this is going to cause is even more foreclosures and even lower home prices.
#4) Banks and lending institutions have been significantly tightening their lending standards over the past several years. It is now much harder to get a home loan. That means that there are less potential buyers for each house that is on the market. Less competition for homes means that prices will continue to decline.
#5) Home prices are still way too high for most Americans in the current economic environment. Based on current wage levels, house prices should actually be much lower. So the market is going to continue to try to push home prices down to a point where people can actually afford to buy them. Right now Americans can't even afford the houses that they already have. The Mortgage Bankers Association recently announced that more than 10% of all U.S. homeowners with a mortgage had missed at least one mortgage payment during the January to March time period. That was a new all-time record and represented an increase from 9.1 percent a year ago.
#6) The overall U.S. economy is caught in a death spiral. Unemployment remains at frightening levels, a large percentage of Americans are up to their eyeballs in debt and more than 40 million Americans are now on food stamps. If people don't have jobs and if people don't have money then they can't buy houses.
#7) The Gulf of Mexico oil spill is the greatest environmental disaster in U.S. history, and it is threatening to become one of the greatest economic disasters in U.S. history. Already, real estate agents along the Gulf coast are reporting that the oil spill has completely killed the real estate industry in the region. As this disaster continues to grow worse by the day, homes in the southeast United States will continue to look less and less appealing. In fact, many are now projecting that the crisis in the Gulf will actually crush the housing industry from coast to coast."
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