Availability of Mortgages Slows Residential Property Value Recovery
After a 2 year episode of stagnation with house sale transactions down by as much as 50% at times, there is currently a pent up demand amongst house buyers. In addition many potential first time buyers have had their ambitions held back and now see that property has become excellent value thanks to approximately 25% value falls. Lastly, government forecasts of the need for an additional 120,000 homes per annum to be constructed have not disappeared. All these factors indicate an imminent revival in the house market and indicate that a timely return to 2007 transaction numbers of around 1 million per annum should be possible even in the short term.
What presently seems to be thwarting this amelioration is the shortage of mortgage finance, in particular for first time buyers. Mortgage approvals are on the increase month on month but are still 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 house buyers with a degree of caution. The banks must lend to be profitable and it is profit which will best repair their balance sheets, but it is vital that they lend prudently, it is widely held that their imprudence in house lending was a principal cause of the credit crunch in the first place. A Quick Home Sale is still possible if the property owner prices the house sensibly and the purchaser has the money 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 greatly restricted. Banks will warily increase their lending in the house market but it will be only people with real affordability who will be favoured with such mortgages. This crisis has recently created a demand for “Sell House Fast” Companies who purchase homes extremely rapidly indeed, but at below market value, using their own funds.
The impact of all this will be a steady increase in house transaction numbers over the coming months. But mortgage applicants will be limited on affordability by more careful income multiples and will have to continue to bargain hard for the house they desire. Sellers will have to accept, especially if they want to Sell Property Fast, the reality that their house is now worth 25% less than 2 years ago, but they will gain by getting their next house at a similar discount.
So the merry go round of house transactions will continue and the mortgage market will unquestionably prove to be the main inhibitor on house prices in the coming months and years. In time to come the past 2 years of tumbling house prices will come to be seen as a necessary market correction brought about by a return to more conservative lending values. In the meantime a steady rise in house prices can now confidently be predicted.
Technorati Tags: No Tags
Related Tags: No Tags
Possible Related Posts
No related posts
