What's going on With the Housing Market?

As you may have heard recently, the United States economy and housing market are in a state of despair. We know the government has tried implementing new measures to breathe some life into it, but obviously they've had little success thus far. Between the dollar's shrinking value and rising gas and food prices, the US economy is quickly heading toward recession. One of the main problems we've seen already is home values plummeting thanks to the ever declining housing market. American's percentage of equity in their homes has fallen below 50%, a terrible sign for our home market. Basically, this means we're paying more on our mortgages than what the house is actually worth. With the economy continuing to struggle, many people are having trouble making ends meet in paying their mortgages. Now typically we'd do everything we can to make our payments on time and keep possession of our home, right? Most people don't want a foreclosure on their credit report and be forced out of their home. However, with the actual values of the home's so low, many people aren't as concerned about foreclosure and even see it as real option. Some analysts believe most of the people who are willing to take a home foreclosure were the same ones who took advantage of the low initial interest rates offered in adjustable rate mortgages during the housing boom around 2004. Financially they probably weren't really ready to buy a home and now can't keep up with their mortgages after their rates increased.

How Are Home Equity Loans Affected by the Declining Housing Market?

Unfortunately for many home owners, the declining housing market has had a negative affect on home equity loans. Recently, home equity loans have become difficult to get approved for, they've increased in interest rates, and more people have begun to fail to pay back their loans. Home equity loans have always been fairly popular thanks to their low interest rates and the ability to borrow a large amount with them. Many home owners have used them for making major home repairs or for emergencies, but the declining housing market has more lenders rejecting applicants. Lenders don't want to fund a home equity loan that might someday be worth more than the house itself and its leaving buyers with no where to turn. With lenders offerings less funding, it also means new buyers are being forced to put down a much larger down payment on their homes. It's a difficult cycle to break and probably requires the economy to turn around before anything really changes.