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Home Purchase / Housing Market Could Become Volatile
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May 9, 2005 LOS ANGELES -- In the past three years or so there have been a number of
various risk-ridden practices by online lender
and local financial institutions countrywide that have catalyzed a so-called
"boom" in the home purchase
mortgage and overall housing market. As the old adage says, "What goes up
must come down." This adage has somewhat been given more weight with respect to
home purchases in our near future according to the FDIC, or Federal Deposit
Insurance Corp.
Last week the FDIC showed in a report published in the Washington Times that
home prices bounced upwardly by a minimum of 30 percent above the actual rate of
inflation in 2004. This tally was centered on 55 various metropolitan areas, all
of which are in California, Florida
and some parts of the Northeast portion of the United States.
If one evaluates historic times where so-called "housing booms" have been
present it isn't hard to see that these surges in
purchasing homes don't
last as long as many would hope they should, or can.
Those who base forecasting on trending from previous similar market situations
will be glad to know that the majority of housing booms in our past did not end
in "busts". A "bust" being defined as a 15 percent or greater plummet in housing
prices.
According to the FDIC, "risky lending practices" can be somewhat defined as
obtaining of loans on easy credit.
Home mortgages processed using ARMs, or
adjustable
rate mortgage and interest-only
mortgages. The three of
these alone put borrowers, lenders and the FDIC at risk on the grand scale the
moment that serious demand for purchasing homes levels-out.
News article by Stockton Marquette,
Mortgage Industry Analyst
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