I know we have all heard around our coffee shops, at the dinner table and even at the doctor’s office. America is on the road to depression. It seems like there is no end to the trouble we have gotten into with repackaged loans, credit problems and job insecurity.
- So why are Reverse Mortgage Lenders still in business, while other banks have been failing?
- Another good question, why did the FHA raise the maximum home value they will lend to 417,000k in October 2008?
- Just what are house prices looking like today?
The three questions I have been asking myself, lately.
I was jut reading a blog called Calculated Risk where the projected numbers for California and Florida certainly do show a drop form last years highs. Yes its true, all of those 8 quarter gains of 7-20% have been widdled down a bit. Looking at the numbers, by about 44% to be exact.
Yet the trend is that even this month this spike in declines has leveled to about 10% of the High to Low Price of 2008.
2008 reverse mortgage
The author uses the house price appreciation index, taking the highest recorded average to the lowest, we are comparing highs and the lows here. So we see a cooling off of declines at a possible 10% if the economy can get back on its feet fully.
So what does this mean for California? Well, given that the low average of price increase over the last 8 quarters before this perfect storm was 7%we see that the average price of a home raised 56% from the time over 2005. So what we have seen is, a dramatic turn of much of the average communitiies. In some cases house prices increased over 100% in that same time and they are still holding on to 50% gains.
I think the main takeaway is to count on having to be thrifty (smart, not frugal) in the next year, but if you are 62 and older you can still find a way to financial independence with your home’s value. Again I am not advocating that you get a reverse mortgage at any time – unless its the right decision for you and your family. I just have been thinking very long hours about how the economy is shaping up, and what seniors can do to protect their assets with a reverse mortgage.
If you look further, the price to income ratio of homes was so dramatically high in 2006 and 2007 that we saw a great spike in the normal rate at which incomes are reflected to house prices. Normally as inflation rises so should wages and therefore prices… So we see that houses become more “expensive” over time but they are usually set to inflation, (in an earlier post we calculated a house in 1950 to cost around 20,000, and that same house costing 250,000 today which is close to the same price for the smae house).
What is noted about the market turning around the ratio of income to house prices is this current index, it may fall to below 1. It has not been made abundantly clear when this might happen. (What it would mean is a ratio of new home buyers driving the market back up as the economy slings back or investments drying out until the ratio is leveled again.) -please see your Financial Advisor or other source for correct interpretation of this ratio.
If the markets are not stabilized by next quarter you might be looking for your saftey net. Yet even in these times, as we have seen in other crisis throughout the last 60 years, the Government is not pulling out the carpet from below us. In fact they are investing in the economy more than any other time since the 1930’s. Right now might seem turbulent but there are still options for those who qualify.
1-800-681-3340
I look forward to any comments about the current situation and would like to help anyone figure out their options if they need to stop payments and receive guaranteed $ in these stressful times.
