If you were to look at the prices of homes in 1890 you will learn that with an adjustment made for inflation homes in 1990 were the same price. Home prices from 1997 to 2006 were the biggest on record. True that land is becoming more and more limited as populations grow but continued desire to live or invest has still found it possible to squeeze in high rise condos along our beaches and other areas.
Florida’s high rise condo market was a major player in the state’s boom and now its bust. In greater Miami recently there were 40,000 condominiums being built. It is estimated that it will take roughly seven years to work through this inventory. There are just too many variables to tell. It will be a good buyers market.
In many parts of the country prices of real estate have seen little decreases. People buy locally and not nationally after all. In Seattle and Portland prices are actually still rising although a slower pace. In Dallas, Charlotte and Atlanta prices did not soar as they did in California so there is not the decline of the west.
Internationally in Europe, Australia, South Africa and China prices have been rising sharply. In 2004 and 2005 the U.K. saw prices decline a bit but then recover. In the United States there was so much creative and subprime financing that in has shaken other parts of the world. Perhaps the United States will experience a quicker recovery then feared but that of course is the million dollar quesition.
An increase in the conforming and FHA loan limits will mean much lower interest rates that will be historically low, enabling buyers to afford more therefore, demand should increase. The increase in the FHA Loan limit is important because it will allow borrowers to borrow up to 97% of the value of a home with a higher level of credit risk. This increase should ease the loss of sub-prime loans. The FHA is more capable of managing financially risky consumers due to its years of experience doing so. We have now learned that sub-prime loans do need regulation with the FHA now stepping in to begin change.
- Home at $625,000 with a 20% down at 5.5% interest rate will mean a monthly payment of $2,839.
- If prices dropped another 10% for this year, but rates were to increase to 6.5%, the $625,000 home now become $562,500 but the monthly payment would remain at $2,844, slightly higher.
- If rates were to increase to 8%, to the same rate as it was in 2000, the payment would then increase to $3,302, an increase of $463 per month.
- If rates rise to 10%, the same rate as it was in 1990, the increase in payment would be $1,110 per month!