Falling House Prices Fail To Tempt Shell-shocked Consumers

December 24, 2008

US (ChattahBox) – As house prices plunge dramatically with the growing effects of the recession, it would seem like a good time to enter the housing market, especially with low prices and interest rates almost non-existent. However, consumers are wary to take the risk, and in November, while the cost of home ownership dropped, so did the interest in buying.

The fear is logical, as banks go bust, houses foreclose, and dropping prices end up causing current homeowners to owe more on their mortgages then their homes are now worth. All of these factors are making it impossible to bring buyers back to the table, and so hopes that the low rates will give an incentive for property purchase, and so a much needed boost in the economy, are fading.

“If people are scared to put money in the bank, they are going to be scared to make a big transaction like a house purchase,” said Guy Cecala of Inside Mortgage Finance Publications. “They are likely to sit on the sidelines until they feel better about their financial situation.”

But with growing unemployment rates, higher electricity costs, and heavier grocery bills, it seems unlikely that confidence will be coming along any time soon. Which is why the government is becoming desperate for further measures to coax first time home buyers into making that all too important step to saving our economy, including new possible measures much like the one passed earlier this year that gives a $7,500 tax credit to first time homeowners.

“We have tackled this long decline in the sales market for some time now,” said economist David Crowe, “but until the consumer finds some confidence to come back into the marketplace, I am afraid I don’t see a rebound.”

On a personal trying to get home loan these days is much tougher then it was a year or two ago.  In some ways that’s a good thing, because obviously banks were handing out money too readily, but now it seems like they are overcompensating and it can be extremely difficult for certain segments of qualified buyers to get a loan.


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