Home prices tumbled dramatically after the real estate bubble burst. Many homeowners ended up underwater (owing more money than the houses current value) on their mortgages. As properties devalued, so did home sales transactions. The Obama Administration aggressively addressed this issue by instituting a Home Buyers Credit as part of the American Recovery and Reinvestment act of 2009.
Originally, the credit offered was more of an interest free loan from the government. Although homebuyers started to buy properties, it was not enough to make a dent in surplus housing stock. The program was tweaked to offer an $8,000 to first-time homebuyers and repeat homebuyers received a $6,500 tax credit. The government rebate combined with historically low mortgage rates and steep discounts within the housing industry tremendously increased activity in the housing sector.
At this point the program has expired. It was that last minute rush to qualify for the homebuyer credits that convinced consumers to stop waiting. That activity stimulated the housing market and increased home values.
Are Home Prices Going to Continue to Increase?
As of April 30, 2010 the homebuyer's credit program has officially expired. The Commerce Department reported that this end of the program is responsible for a 33 percent drop in home sales activity. Additionally, the Mortgage Bankers Association released information showing a 13-year low in purchase volume because of the five to seven percent decrease in purchasing.
Some markets in the Midwest that were never really affected by the real estate boom are experiences signs of home value stabilization. However, in the opinion of the Wall Street Journal, those home prices may be deceiving as "buyers have largely scooped up much of the inventory of foreclosed homes at rock-bottom prices, and are started to buy non-distressed real estate again." At this point it is too early to tell if the stimulus credit will have any long lasting effect on home price values.
Where Should I look for Cheap Housing now
Even though the homebuyer's credit program has expired, there are still plenty of housing bargains! Fannie Mae announced that mortgage rates are the lowest they have ever been (since they started keeping records of the trend in the 1970s). Low financing rates combined with discounted housing prices in specific regions means there are still plenty of cheap housing options out there.
Huffington-Post suggests those looking for bargain basement housing prices should expand their searches to include Cleveland (Ohio), Jacksonville (Florida), Mesa (Arizona), Boston (Massachusetts), Kansas City (Missouri), Phoenix (Arizona), Dallas (Texas), Baltimore (Maryland), Milwaukee (Wisconsin), and Minneapolis (Minnesota). Each of those cities has had at least 30 percent of their housing inventory deeply discounted by motivated sellers.
