As home prices rise and the economy recovers, fewer borrowers are falling behind on their mortgages, or at least on their primary mortgages. During the housing boom, millions of Americans took advantage of equity gains by pulling money out of their homes through home equity lines of credit (HELOCs). These were largely interest-only loans for 10 years, but that decade is now up for some and coming up for many more. Now, as these loans enter their so-called amortization period--the time when borrowers must start paying down the principal--a growing number can't. "In the aggregate, the home equity market is experiencing lower delinquencies," said Herb Blecher of Lender Processing Services.
What are the main reasons as to why this recovery has been so lackluster? The first reason is that the 2007-2009 recession was caused by the housing bubble and the collapse of the housing industry, which normally kick-starts recovery. After the 2007-2009 recession, since the housing prices are unlikely to return to previous levels, the economy is taking longer to recover. The second reason is that globalization has caused domestic employment to rise slower than if all the increase in employment goes to domestic hiring. (Joel, 2013) Compared to the past, we have more imports than exports (Olney, 2013); as the economy recovers, a greater part of the increase in GDP goes to foreign economies instead of our own.
However, these predictions can only be understood through an analysis of the current macroeconomic situation in the United States. Current Macroeconomic Situation: According to Payne (2014), the U.S. economic growth will strengthen in this year with an average of 2.7 percent because of various factors including the strengthening of consumer and business confidence. The other factor that will contribute to the strengthening of the country’s economic growth is Europe’s emergence from its long slumber, a trend that will brighten the prospects of foreign sales. However, this economic growth will largely be limited by ongoing government deficit reduction. As compared to the first half of 2013, economic conditions are already better since growth increased with an average of 3.7 percent in the second half of 2013.
If this gets to happen there will be a increase in demand for manpower to construct the housing units to be occupied pushing for employment opportunities and increase in market prices of houses. This will be a significant boost towards the deteriorating economy of the United States. Interest rates and mortgage rates will even go lower and in the end we as a nation will have a better economy that it is today. Even though as a nation our economy is struggling, forecasts of future couple years will be achievable only ANY TOPIC (WRITER'S CHOICE)8 if there is a change in the living trends of American adults. A change in this trend will lead to low unemployment levels and growth of the economy.
In Stockton, California the number of home sales in 2013 was 767 down 18.4% year over year [Trulia]. In Chapel Hill, NC home sales in 2013 were 162 up 42.1% year over year [Trulia]. It is evident that homes in Chapel Hill are selling expeditiously which would have a positive effect as this displays strong demand; creating a decrease in inventory and therefore yielding higher prices. When demand incr... ... middle of paper ... ...ven the best case flip scenario. Furthermore, Chapel Hill, North Carolina has shown a stronger resiliency to the housing market crash compared to Stockton, California.
Recent statistics indicate that there is an increase in mortgage applications; however, at the same time there is a decrease in permits and new-home startups that could affect the economy for several years to come. In addition, another disturbing trend is the increase in home building cancellations during the last 3 4 months. Elasticity of Supply and Demand Most Americans consider housing a necessity. "Necessities tend to have inelastic demands, whereas luxuries have elastic demands" (Mankiw, 2004, p. 90). Due to the slight change in price if the quantity demanded increases or decreases, the price elasticity of demand in the home building industry is inelastic.
People with college degrees are paid 80% more than people with only a high school education. When the college degree is from a more prestigious school, that percentage increases even further (McArdle). Even President Barack Obama acknowledged this in a 2012 speech, saying that “The incomes of folks with a college degree are twice as high as those who don't have a high-school diploma” (Lemann). While a college education is a good investment for the long run, the cost of college is not a positive. The price of goods has risen due to inflation over the past decade, but during that time college increased drastically.
In some cases it’d be easier to buy a house and get it over with, than to slowly pay off your school debt and be rewarded with even more when you buy a house. Studies have shown that with an increasing financial weight most twenty-somes are waiting longer to start families, causing delays in the generation and giving couples less time to create bigger families. The average age at which couples are getting married is between the age of 27 and 29, which has been raised by 10 years in the past couple decades. With debt delaying the start of families and purchasing of housing it creates less abilities and opportunities for the economic
This led many people to buy more expensive homes than they could actually afford. Many enjoyed low introductory interest rates afte... ... middle of paper ... ...entives to Boost Economy. Retrieved February 27, 2009, from http://www.jsonline.com/business/36310464.html Knox, Noelle., (2007). Home Builders Foundations Shift with Shaky Market. Retrieved February 19, 2009, form http://www.usatoday.com/money/economy/housing/2007-10-08-home-builders-downturn_N.htm Louis, B., (2009).
However, if we expand home buyers at the expense of rental owners we will still cause significant damage. Also, keep in mind that the U.S. population is growing at about 1% a year and if left to natural mechanisms will take years to soak up the oversupply. First, let's try to solve the issues that are making the situation worse. We will quickly touch on the oversupply problems and then move onto the demand solutions. One of the reasons for the oversupply of housing is that many individuals that can afford their homes are walking away because of the negative equity in the house.