Hundreds and perhaps thousands of local real estate markets scattered throughout the U.S. are insulated from the sub-prime loan crisis and as a result are not suffering from fall out of the sub-prime fiasco, according to the latest Housing Predictor study.
The sub-prime crisis is revealing itself to pale in comparison to the U.S. Savings and Loan Fraud Crisis of the late 1980’s, the study shows. More than four dozen markets, varying in socioeconomic levels and size were studied from the east coast to west. The study indicates the economic damage caused by the sub-prime crisis should be limited to areas of states with lower economic incomes and should not affect the nationwide economy.
The sub-prime melt down has been the single largest factor affecting the nation’s housing markets since the Savings and Loan Fraud Crisis. The study clearly shows many markets are unaffected.
The S&L Crisis cost every American man, woman and child an average of $10,000 each. The affects of the 1980’s crisis were long lasting and resulted in major economic damage to the national economy.
Vacation and second home markets are immune to the fall out, mainly as a result of many second home buyers paying cash for properties or having the financial means to make payments on mortgages they can more easily afford.
Home owners in higher income areas of the country are also experiencing few troubles as a result of the sub-prime crisis, which is mainly confined to less affluent urbanized areas.
In the nation’s business center of commerce, Manhattan is seeing its housing market hit new highs, unaffected by the crisis and bolstered by a stock market that has been riding a bull market for years.
Palm Beach, Florida long recognized as a home for wealthy vacationers has seen its markets sales slow, but witnessed few sub-prime woes. In the Florida panhandle, Destin’s vacation market has had prices fall, but mainly because of higher interest rates and a run up in appreciation that lasted well over five years.
The Housing Predictor study shows a clear differentiation between haves and have-nots in the sub-prime crisis. Many people with poor credit histories that would not have qualified for conventional financing became new homeowners as a result of favorable sub-prime loans with adjustable rates. The financial markets that provided the sub-prime mortgages have soured and caused more than 60 lenders to either file bankruptcy or go out of business all together.
The sub-prime mortgage business has few federal regulations and provided access to mortgages to many with poor credit histories, who would have not otherwise qualified for financing. Home ownership hit record levels with the addition of the sub prime mortgages, only to erode with higher interest rate adjustments resulting in nearly record high foreclosures.
Housing Predictor forecasts that more than 2 million homeowners will be foreclosed through 2009 as a result of the sub-prime fall out. Hundreds of thousands of home owners have been unable to afford higher mortgage payments as a result of adjustments in their payments, some of which have tripled. Other home owners have been unable to fill vacancies in rental properties they have purchased.
Many more affluent markets throughout the nation are showing few signs of fall out. In Malibu, California and posh Beverly Hills closing agents can’t remember closing a transaction with a sub-prime mortgage.
The foreclosure rates in some states are already beginning to decline, displaying further evidence that the worst may already be over in the nation’s real estate slow down, providing a sizeable foreclosure market that will linger a number of years.
Higher mortgage payments in an estimated million plus more adjustable rate mortgages will also have an affect on the housing markets, providing an additional inventory of foreclosures. But it should also not have the overwhelming adverse affect the S&L Crisis had on the nation, according to projections provided by the study.