Greater Michigan Realty

Following a two year phase of stagnation with home sale transactions down by as much as 50% at times, there is presently a constrained demand amongst home buyers. What’s more lots of potential first time buyers have had their ambitions thwarted and now believe that property has become very good value due to approximately 25% value falls. And finally, government forecasts of the need for an extra 120,000 houses a year to be built have not gone away. All these factors indicate an imminent revival in the home market and suggest that an early return to 2007 transaction numbers of approximately 1 million a year may be possible even in the short term.

What currently seems to be holding back this improvement is the lack of availability of mortgage finance, especially for first time buyers. Mortgage approvals are on the increase month on month but remain at levels appreciably below the mid 2007 levels. This seems to be more to do with supply rather than demand as the banks continue to increase their lending to home buyers with a degree of caution. The banks must lend to be profitable and it is profit which will best repair their balance sheets, however it is vital that they lend cautiously, it is widely held that their carelessness in home lending was a key cause of the financial crisis in the first place. A Quick House Sale is still possible if the vendor prices the home sensibly and the buyer has funds in place to complete the transaction.

Income multiples and lender assessment and credit scoring criteria appear to be set to return to an earlier time of prudence and the availability of non status mortgages or impaired credit mortgages will be seriously restricted. Banks will cautiously increase their lending in the home market but it will be only people with real affordability who will be favoured with such loans. This crisis has recently created a demand for “Sell House Fast” Companies who purchase houses extremely rapidly indeed, but at below market value, using their own funds.

The result of all this will be a gradual increase in home transaction numbers over the coming months. However purchasers will be limited on affordability by more cautious income multiples and will have to continue to bargain hard for the home they desire. Sellers will have to accept, especially if they want to Sell Property Fast, the reality that their home is now worth 25% less than two years ago, but they will gain by getting their next home at a similar discount.

So the merry go round of home transactions will carry on and the mortgage market will definitely prove to be the main inhibitor on home prices in the coming months and years. In time to come the past two years of tumbling home prices will become to be seen as a necessary market correction brought about by a return to more cautious lending values. In the meantime a steady rise in home prices can now confidently be predicted.

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