Housing Trends Arising from the Foreclosure Crisis

Published by julia | Filed under Buyer / Seller Tips, Real Estate

The foreclosure crisis has hurt the American psyche. Many Americans who lost their homes never thought they will face the hardships they are experiencing. The others who were able to keep their homes never thought they are going to suffer the worst recession in decades.

Now Americans are learning their lessons. Here are some of the housing trends largely driven by the foreclosure crisis:

Many buyers now prefer smaller homes. Gone are the cravings for homes bigger than the 2,349-square-foot houses that were already considered large in 2004. Aside from smaller monthly home loan payments, smaller homes entail lower maintenance and energy costs.

Households are moving back to the centers. People now want to live near where their jobs are. As energy costs increase and time for family gets tighter, they are now willing to sacrifice open spaces and views of nature in the suburbs to have shorter commutes.

Fewer Americans moved in 2008 and 2009.  The Census Bureau reported that 12.5 percent of the U.S. population or 37.1 million moved last year, a jump from 11.9 percent in 2008 but much lower than the rate of 15 to 17 percent in normal times. Of those who moved, more than 67 percent moved within the same county while only 12.6 percent relocated to another state.

More families move in together. After losing their homes to foreclosure, many families are forced to move in with their parents or siblings because they do not have the money for rentals. A report from the National Coalition for the Homeless said that more than 76 percent of people forced out of their homes in 2008 had to stay with families or friends.

More people use FHA loans to buy their homes. In 2005, only 5.8 percent of all residential mortgages used FHA loans. In the first months of this year, the percentage has increased to about one-third of all home loans, based on reports from the Mortgage Bankers Association.

Conventional home loans were more popular before the foreclosure crisis because they were much easier to obtain. Now that banks have increased their down payment and tightened their lending requirements, buyers are turning to FHA loans.

More homeowners are considering energy efficiency when looking at homes to buy. Based on a report from the American Institute of Architects, home builders are now designing more modest kitchens and bathrooms to address the new demand for energy-efficient homes. The tax incentives offered by the Department of Energy have certainly helped homeowners become more conscious about cutting energy costs.

Strategic default has entered the American vocabulary. Paying the mortgage at any cost has always been an American commitment. The crisis has eroded this attitude, and now many are walking away from their home loans.

Lastly, the crisis has brought forth plenty of businesses related to foreclosure. Foreclosure investing, foreclosure list selling and   foreclosure counseling are just three of the many ways people are earning money from the crisis.

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