Long-term Effects of Housing Crisis on Hamilton NJ Real Estate

A recent study by the Mortgage Bankers Association, conducted by Kentucky economics professor Joe Peek, concludes that “the current financial crisis and recession exceeded the devastation created by other post-World War II recessions.”

Saving rates have risen substantially. Many Americans will continue to cut spending sharply out of necessity, “others out of fear of what the future holds,” Peek said.  When it comes to housing, he added, it was unlikely that the dramatic rise in loan delinquencies, foreclosures and bankruptcies would show a “meaningful” decrease in the foreseeable future.  “High unemployment and low house prices are widely projected to remain for an extended period, as well as the rise in problem loans at banks that will restrain their willingness and ability to provide credit,” Peek explained.

The two buying groups who will be most affected are the 1st Time Buyers and downsizing "seniors."  Peek said, “The impact of a higher unemployment rate for Americans ages 16 to 24 could have a lasting effect on lifetime earnings and attitudes toward risk and social policies."  In addition, those nearing retirement are delaying it and re-entering the labor force “in an effort to rebuild some of the retirement wealth that was wiped out by the recession,” he said.

Although the housing industry had been hoping for these groups to sustain growth over the next couple of decades, Mark Zandt, Moody's Economy.com chief economist in West Chester, Pa. emphasized, “The tougher economic circumstances for twenty-somethings and fifty-somethings will weigh on housing demand over the coming decade."  Today’s housing market is imposing a bit more discipline in the pre-ownership period, by requiring bigger down payments and better credit scores.

Although it is probably likely that the lack of good-paying jobs will delay the entry of the current 16- to 24-year-olds into the home-buying market, “it’s less clear what effect the reentry into the workforce of baby boomers is going to have,” said Rick Sharga, chief economist of RealtyTrac.  “In some cases, this may keep inventory levels down, as the boomers stay in their current homes while going back to work,” Sharga said. “On the other hand, they may opt to ‘trade down’ in an effort to maximize their retirement dollars while they’re replenishing their IRAs and 401(k) accounts,” he said. “At best, this all suggests a pretty slow, marginal recovery over the next few years,” Sharga added.

The bottom line for buyers will continue to be high levels of inventory giving buyers wide choices, low rates, and pressure on prices from short sales and bank-owned properties for the forseeable future.  Contact me by phone or email to talk about buying a home in Hamilton or any community in Mercer County.

Joe Giancarli, Sales Associate
609-658-2612
jgiancarli@remax.net
http://www.joegiancarli.com/
http://www.njhomesource.com/
http://www.newjerseynewhomes.blogspot.com/

(resource:  RisMedia.com and The Philadelphia Inquirer)