Economic Woes

According to Zillow.com's recent Real Estate Market report, more than a third of homeowners in Orange, Seminole, Osceola and Lake counties who bought homes in the last five years are now owing more than their homes are worth. For those who bought homes at the peak of the market in 2006, that number jumps up to a whopping 72%, and 66% for those who bought last year. So far in 2008, nearly a third of buyers who bought homes during the first half of the year are also facing negative equity. What this means is that the prices of the market are currently back down to the 2004 level.

At this point, I probably don't have to tell anybody that falling home values are at the very center of our tumbling economy. Without equity, homeowners are having trouble tapping into credit for things like medical bills, home improvement projects and education. In essence, they're being forced to hold onto their money at a time when the economy needs it to be circulating.

Owners are also forced to hold onto their homes longer, unable to sell their homes for a profit in this market. If they do manage to sell, they will usually be taking a loss, which in turn lowers the value on all their neighbors' houses. 

Selling your home at a loss isn't even the worst. Many owners are finding that they can no longer afford the homes that they're living in but are unable to refinance because there isn't enough value in them. This can lead to foreclosures, flooding an already overstuffed housing market with more homes. These days, banks are often willing to let properties sell for 30-40% less than they were originally worth just to get rid of them. And, of course, this lowers the value of all the nearby homes even more, leading to more negative home equity and possibly more foreclosures.

Even when a seller does find a buyer interested in their home, those buyers will face stricter loan criteria thanks to wary lenders. They may not even qualify to buy that drastically reduced home!

This is a lot of doom and gloom but it isn't news anymore. Everyone knows the economy is suffering, everyone is starting to feel it when they pay their mortgage, or buy their groceries, or fill their gas tank. If there is any good news to be found, it's this: we may not have hit the bottom yet, but we can sure see it from here. And once we've reached the bottom, homebuyers will find themselves in the greatest buying opportunity of our lifetimes - with lower prices, a huge selection, and deals around every corner. As soon as they are released from the credit crunch, buyers will take advantage of these opportunities, sweep up the wreckage and lift this economy out of this hole and back into the sun.

Soon would be nice, though, huh?

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