Housing Slump Continues Due to Failed Subprime Mortgages
By Mark Donovan
The U.S. housing market is still in trouble, due mainly to failed subprime mortgage practices. Recent home sales reports show a modest increase, however the increase is considered by many analysts to be half of what they were expecting.
Analysts believe the major contributor to the housing slump is the increase in mortgage foreclosures, or more specifically subprime mortgage foreclosures.
Over the past several years, many subprime home mortgage institutions were offering home mortgages to individuals who should never have received them. The homeowners receiving them did not meet traditional basic financial home mortgage standards. However, as with any sector boom, there are always folks out there looking for a quick buck. Unfortunately, in this case it was fly-by night home lending institutions that quickly setup shop and took advantage of the housing market boom. Normally good lending institutions cap the amount a homeowner can finance, relative to their income. This cap usually has been in the range of 28-33% of their income for the home mortage, and around 36% for total financing including home, car, credit card purchases, etc. These fly-by night home lending institutions allowed much higher caps, basically enslaving the homeowner to a home mortgage that they could not sustain. The result, eventual foreclosure.
The housing market has now taken a hit by this type of lending behaviour and companies such as Lowes and Home Depot have already seen an impact in their businesses.
The speed in which the home industry turns around will be directly proportional to how quickly the subprime mortgage industry gets cleaned up. Fortunately the cleanup has already begun, however there is probably another year ahead of us before the smoke fully clears.
Over the past 20+ years Mark Donovan has been involved with building homes and home additions. For more DIY home improvement information visit HomeAdditionPlus.com and his Buying Subprime Mortgage Leads
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