3 Things That May Cause Real Estate To Drop Further in 2010

by Minority Fortune

It was a rough year for real estate in 2009. While prices did hit all-time lows, it’s highly possible that the lows could fall further this year. CNN Money provided three reasons for that possibility. While we’ve discussed the underlying reasons for real estate falling further in 2010 on the commercial side before, we’d like to couple that with these additional reasons which we believe make a lot of sense.

Submerged House

3 Reasons…

1. Additional Foreclosures & Defaults: More catastrophes are set to occur from the real estate bubble. With some real estate’s value dropping below its mortgage rate, owners are going to avoid pocketing these losses and walk away from their loans. Also, many homeowners are seeking a modification on their mortgages and getting unsatisfactory responses from the banks.
This will also cause them to result in either foreclosure or abandoning their mortgage.

2. Spiked Interest Rates: The government has been supporting low mortgage rates by purchasing mortgage-backed securities. However, that program is set to expire this March. As a result, banks will have no problem with rising their rates above a speculated 6%.

3. Termination of Homebuyer’s Tax Credit: This popular tax credit that awards $8,000 to first-time homebuyers and $6500 for buyers who already have a home is set to end by the end of April. Once it ends, it’s sure to curb home buying.

Once again, this doesn’t have to spell bad news as much as it presents an opportunity for bargain real estate. It’s unfortunate that the average consumer is impacted by the greed of banks. However, you know the saying: when life hands you lemons, make lemonade! The market will eventually correct itself in due time. Meanwhile, if you’re looking into real estate, you may stand to get a great deal.

*Image courtesy of Jeffrey Coolidge.
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