The areas hardest hit by the mortgage crisis were based in markets where larger loans (such as jumbo loans) were required to fund even the most conservative of property purchase. The property values in states including California, Florida, Nevada and Arizona declined as much as 50 percent courtesy of the subprime mortgage mess. According to Moody's Analytics economist, Andrew Gledhill, the hardest hit markets need additional time to heal. Gledhill has stated, "I don't think this is a one- or two-year problem. This is a five-or six-year problem."
Some areas were not as greatly impacted by the housing market value retraction as their metro markets. A majority of Midwest properties were not fully consumed by the boom and bust cycle in the real estate market. Despite that, approximately 50 percent of the nation's metro areas experienced home price devaluation under 10 percent. Those areas are expected to see a gradual increase in home values and should be back on track in a couple of years.
Factors Hindering Real Estate Recovery
The mortgage meltdown did not happen over night. Prior to the crisis, mortgage lenders were heavily involved in subprime home loans. Subprime mortgages are considered to be the riskiest types of loans, as the consumers involved typically do not have the credit rating and assets to qualify for prime mortgage opportunities. Ultimately, this house of cards collapsed and dragged real estate values down, however that was not the only sector affected.
Additionally, the financial sector was negatively impacted by the subprime mortgage mess. Some Wall Street investors started to "bundle" subprime mortgages into investment packages and funneled billions of dollars into the financial products. As the most risky of mortgage holders started to default on their loans en mass, Wall Street felt the pinch courtesy of the faulty investments they banked on.
What is left is a jumbled mess of unnaturally highforeclosure rates, national unemployment statistics near the double-digit range, decreased consumer confidence, a shaky stock market and a surplus of real estate inventory. All that has combined to hinder any immediate real estate recovery.
Cities Set to Rebound Now
Although the news regarding real estate gains is bleak, there are some cities bucking the trend. CNNMoney.com recently reviewed the data and noted seven cities that are on point to post real estate market gains prior to the two-year turning point predicted by other analyst. It is important to note, that these gains do not automatically restore property values to the pre-bust levels, but are important steps in the right direction.
The cities with the best chance of rebounding by 2011 include:
- San Francisco, California: Estimated home value increase 4.8 percent
- Seattle, Washington: Estimated home value increase 3.8 percent
- Pittsburgh, Pennsylvania: Estimated home value increase 2.2 percent
- Rochester, New York: Estimated home value increase 2.2 percent
- Memphis, Tennessee: Estimated home value increase .4 percent
- Oakland, California: Estimated home value increase .4 percent
- Birmingham, Alabama: Estimated home value increase .4 percent
Although the data has proved that America's economy is in a sad state, there are still individuals not feeling the pain. For those lucky few, there has never been a better time to buy a home and get a slice of the American dream and Mortgage Marvel exclusive mortgage rate finder technology can help make it happen!
