OK, so you know the nation's real estate market could be doing better… a lot better. But with the economic crash getting smaller and smaller in the rear view mirror, what's affecting our real estate market right now?
1.The Presidential election
It seems a little unfair for Presidential hopefuls to play a big role in real estate. After all, whoever wins gets to go live in the White House -- where they don't have to worry about a mortgage, closing costs, or resale value!
Seriously, though, all of the fighting between political parties has left Americans on edge. And, unfortunately, when people are on edge and don't know what's going to happen, they're far less likely to make major purchases and sign on for lengthy mortgages.
2.Skyrocketing student loans
Did you know that the average student loan debt for people under 30 is now $21,000? That's a 56% increase since 2005! With financial burdens like these hanging over their heads, more and more young people are being forced to delay their dreams of homeownership until they can get their finances under control.
Making the problem worse is that starting salaries are getting lower and lower. Right now, the average starting salary for a college graduate is down to $27,000. At that rate, it would take someone 11 years just to pay off all of their student loans -- meaning they can't add a mortgage to their already-crowded financial plate!
3.The unemployment rate
As much of a problem as low salaries are, NO salaries are also a big problem! As of July 2012, the U.S. unemployment rate sat at 8.3% -- and that doesn't even include all of the people who have maxed out their unemployment benefits. When you have millions and millions of people out of work, you simply can't expect the real estate market to thrive.
For the people who do have jobs, many of them are afraid to go out and buy a house -- for fear that a pink slip could leave them dealing with missed mortgage payments and a foreclosure nightmare.
4.The Baby Boomers
As a whole, Americans are getting older -- due in large part to all of the Baby Boomers who are at (or have already surpassed) retirement age.
Here's why that's so important:
Typically, when people hit retirement age, they sell their homes in order to get something smaller (or, they move to a new place to take advantage of their work-free lifestyle). In decades past, retirees were able to sell their homes to younger generations. But with so many 20-somethings crushed between low salaries and high student debt, there aren't as many young buyers as there used to be. Thanks to the basic principle of supply and demand, it's hard to generate a big profit on your house if there aren't a ton of buyers out there. With so many Baby Boomers out there, the supply is bigger than ever, but there isn't enough demand to keep up.
5.Tighter credit standards
Flash back to 7 or 8 years ago, and you probably remember how easy it was to quality for a loan. In fact, it was too easy -- as evidenced by the housing bubble burst that we're still trying to come out of!
Today, lenders are much stricter about who qualifies for a loan and who doesn't. Thanks to relatively new guidelines from Freddie Mac and Fannie Mae, most lenders are going to require homebuyers to have a credit score of at least 680. There is some wiggle room in there, but if your credit score is less than 620, forget about qualifying for a loan. That alone is cutting down on the number of homebuyers out there!
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