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6 reasons why a housing crash isn't likely

NEW YORK – Nov. 20, 2015 – The 2006-2007 housing bubble happened almost a decade ago. Should Americans be worried that history could repeat itself? After all, home prices have risen above the bubble era in most areas of the country.
However, the bubble’s pain still stings, and many Americans worry that it could happen again. But housing experts say there are many reasons Americans shouldn’t be concerned about “Housing Crisis Part II” anytime soon, including:
1. Fixed-rate loans are more common. Many Americans have refinanced to a fixed-rate mortgage so when interest rates rise – largely predicted to start next month – there won’t be as much shock when short-term Adjustable Rate Mortgages readjust compared to the 2008-2009 era. In 2008-2009, many Americans saw their ARMs reset to a higher rate that they could no longer pay, which sent defaults skyrocketing.
2. Old distress is being flushed out through bank repossessions. Bank repossessions recently reached their highest level in more than two years. But the reason behind the climb is positive: Banks are flushing out long-term distressed properties rather than adding more.
3. Foreclosures have fallen dramatically. Despite the uptick in bank repossessions, the number of loans in foreclosures is 2.1 percent. That marks the lowest level since 2007, according to the Mortgage Bankers Association.
4. First-time buyer programs are bringing new clients into the market. In addition to new downpayment programs, the Federal Housing Administration moved this year to reduce its annual mortgage insurance premiums by up to $900 per year. That move alone has been predicted to help jump-start home sales by the most since 2006. What’s more, it could lure 140,000 new buyers to the market, according to the National Association of Realtors®.
5. The economy is strengthening. Over the past five years, the U.S. has added jobs at a steady rate, now replacing many of the jobs lost during the recession. Also, the quality of jobs is improving as the economy strengthens.
6. New-home construction remains dismal. The supply of existing for-sale homes is lower today than it was in 2000 – despite the population growing by more than 14 percent. Also, new single-family starts remain 60 percent below the peak in 2006 and are about 25 percent below the average for the past 15 years. An oversupply of the homes on the market isn’t likely any time soon.
Source: “10 Reasons Why Another Imminent Real Estate Crash Is Unlikely,” (Nov. 10, 2015)
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Source: Florida Realtors Feed

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