Stabilization of the Kentucky housing market will develop when more people go back to work. The real unemployment rate in the state, including the underemployed leaves one out of every five people out of work. Higher foreclosures are also contributing to the ailing real estate market, which is projected to begin stabilizing sometime during 2010.
Economic turmoil and high unemployment are contributing to the hardship in housing markets in Kentucky, battered by job losses in auto industry related fields, manufacturing, tobacco and construction. However, lower average home prices also provide a strong force for Kentucky markets to pull out of the housing downturn.
Kentucky prices may have seemed like they inflated wildly during the real estate boom, but not at levels experienced elsewhere, which is a positive trend for the state’s markets.
Despite government incentives for first time buyers housing prices are still declining in most markets, mainly because the state started its downturn after most of the rest of the country.
The first time buyers’ tax credit attributed to a rise in sales in Lexington, and home sales should improve in 2010 as the market copes with the financial crisis and shortage of readily available mortgage financing. Lexington appreciated during the boom, and is experiencing smoother fall-out, forecast to have average housing prices deflate just 5.2% in 2010.
In Louisville, home sales are picking-up speed but more restrictive appraisal guidelines are causing an increasing number of home sales to fall through. As a result, it’s gotten harder to get financing and that is acting to slow market volume. Louisville home sales should be ushered by the expansion of the home buyers’ tax incentive and prices are forecast to decline 4.3% for the year.
Bowling Green has been hard hit with job lay-offs in the auto industry, adding to the volume of increasing foreclosures. Bank assisted short sales, in which the lender cooperates with a new buyer to reduce the amount of a homes mortgage are likely to aid the market, but not before government legislation is enacted to force bankers to help homeowners at risk of foreclosure. Bowling Green is forecast to sustain average housing deflation of 6.3% in 2010. GM has idled workers at the local auto manufacturing plant.
Paducah was one of the last housing markets in the country to slow as a result of local community banks that were lending after the financial crisis froze the purchase of mortgage securities on Wall Street. Higher lending standards were adopted by local lenders as a result and the market receded only to be aided by government incentives.
The housing bust will take Paducah a while yet to overcome as bankers lend to only the most credit worthy borrowers. Paducah may be the last market in Kentucky to rebound as a result and is forecast to have average price devaluation of 3.8% for the year.