The fed is desperately trying to come up with a solution to rescue those individuals who are drowning in negative equity in hopes to free up some of their finances. The logic is that those individuals will then turn to the marketplace with their newly freed funds and bolster the sluggish economy with it. But the fed may be in no position to bail anyone else out with the looming fiscal cliff.
But as property values go up, even slightly, so do the ambitions of property owners who may feel they can capitalize by asking for higher selling prices or increasing monthly rents. As such, commercial and residential renters should look to lock in low monthly payments by securing long-term occupancy contracts before prices go any higher in the upcoming year.
“That might be problematic for some rent-to-own properties,” says Brian McNerma, credit consultant with rent to own property listing service, HomeStarSearch. “Sellers will try to make up for their financial losses by passing the negative equity on to potential homeowners.” But not all property owners are underwater on their mortgages, he insists, and he urges those interested in lease-option to research the contract and the seller carefully.
Renters unable to escape higher monthly rents, however, just might consider making the long-awaited home purchase.Record-low interest rates and affordable prices are definitely enticing to new home buyers, but they do little to help those currently upside-down on their mortgages. Therefore, the number of home sales in 2013 – while trending upward slowly but surely – will be greatly limited by those who can’t afford and cleanly walk away from negative equity and start anew.
In fact, those affected most by negative equity are young owners who purchased homes with low down payments and didn’t have a chance to see equity improve before the housing bubble burst. Now they’re left with financial security enough to maintain the mortgage, but not enough to get out from underneath it.
Despite rising property values, the market is far from healthy. Even with seeming upward trends in major markets, it’s important to look at the other factors that influence those trends prior to making the assumption that things are going well.
The slow growth however, is good long-term as it allows potential buyers to establish down payments, build credit, and take advantage of various financing options without housing becoming too unaffordable. The market depends on this type of behavior, which is much more stable than the easy credit days prior to the recession.
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