The Housing Market Threatened by the Slow Economic Recovery

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The number of new job openings reached its highest point in six years in February 2014, but this positive development was followed by a smaller growth of jobs in March than Wall Street experts expected. The situation in the job market clearly illustrates that even though the US economy is experiencing growth, it is not recovering as quickly as projected. This can have a major negative impact on the housing market in the short term and possibly in the long term.

In 2013, house prices increased by 11.3%. During the final quarter of the year, home prices in 119 out of 164 metro areas rose. These events were seen as major positive developments and as clear signs of recovery of the housing market. However, these numbers did not tell the whole story. Despite the increase, house prices still remained 8% lower than in 2007. In January 2014, the prices fell in 12 of the 20 largest cities in the country. Even though this can be explained with the lower demand due to the bad weather and the uncertainty about interest rates, this is certainly an alarming sign.

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The prediction for 2014 is that house price will still increase, but at a much lower rate. The rate will continue to decrease and may even become negative in the coming years. The major reason for this trend is the slow economic recovery which does not produce a particularly high number of new jobs and which does not lead to significant increase in the income of consumers. The real household income is now lower than it was in the beginning of the century and major increases are not expected in the near future.

One of the clearest indicators that the sluggish economy has a negative effect on the housing market is the Mortgage Credit Availability Index. It is currently 113.5 while it was 800 in 2007. The great difference is partially due to the stricter lending requirements, but it is evident that fewer people can afford to buy a home now.

Mailynne

Mailynne

Mailynne serves as a content strategist and writer for mortgage.info. She is ahighly task-oriented strategic planner and experienced writer. Over the past 10 years, Mailynne has managedcontent for both large corporations, non-profits and businesses. She specializes in managing digital marketing,branding and web development content. Mailynne has worked with a variety of local, national and international organizations.

Contact: mailynne@mortgage.info
Mailynne

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