2012 Outlook: People who generally focus on local market conditions remain largely unaware of the national issues that pose a greater threat to home values.
The value of real estate will likely continue its slow and steady decline throughout 2012. Here are ten large scale predictions that may have a negative impact on home values in the near future.
The government and mortgage industry both agree that increasing down payments can help prevent future losses. Forcing buyers to invest more of their own hard earned cash towards the purchase price may prevent them from falling under water on the mortgage or defaulting and abandoning the home as easily as it was in the past. The government wants it raised as high as 20% across the board while the mortgage industry is pushing for more risk-based terms, meaning the lower a persons credit score is, the higher their down payment should be and vice versa. Regardless of who gets their way, as mortgage defaults continue to rise it becomes more likely that 5%, 3%, and 0% down payments will soon be a thing of the past.
The government no longer wants mortgage interest to be tax deductible, making it that much more expensive. This has always been a familys largest write off and without it they will receive significantly smaller tax returns every year and place a dampener on the yearly economic stimulus that the tax season provides our economy with. It would no longer be advantageous to purchase property for tax shelters and buyers will become more aware of how much interest is being tacked on to the mortgage. This triple threat of more expensive loans, buyer awareness, and smaller tax returns will have a devastating ripple effect throughout our economy.