Despite how many reports are claiming that new construction is the key to developing a healthy recovery method for the real estate market, it would appear these reports aren’t looking in all directions very effectively. If they were, there would probably be a leniency towards re-visiting that mentality and developing a more comprehensive approach, rather than a shrouded one.

Fluctuations in the property market are of no surprise to many at this point, however these particular market activities seem to be telling a story not many want to hear – the market’s recovery is moving in the wrong direction. As it stands, new buyers are in a tough position when it comes to entering the market due to the revisited amortization constraints wherein down-payment amounts increased, while amortization lengths were decreased, meaning more money up front, and higher payments; a compromising situation indeed. So, what happens now? Property investors have incidentally taken the market by storm to scoop up properties at a healthily reduced rate to be owned as secondary properties, and rented out to the general population – presumably those same potential new buyers who can’t afford to get a piece of the market activity.

Reports are suggesting that one of the only ways this young buying population will enter the market is if their baby-boomer parents (the same demographic investing in the renter’s market) provide down-payments in order to make the endeavour more affordable. The means to do so come from their parents’ act of downsizing, thus freeing up funds that can be allotted to their offspring’s hopeful property purchases.

Our neighbours to the South have also released some purchasing statistics which indicate the trend that pains new buyers is one felt on both sides of the border, as the sales of previously owned homes hit the highest they’ve been in 3-1/2 years. Now, if you take a look at these impeding market factors it’s hard to lean on the argument that new developments are the way to go, as they are even less affordable than previously owned homes and provide no positive alternative to what’s paining the market: the low number of new buyers.

Instead of putting up new developments that hardly anyone can afford to the extent that would stimulate a positive increase in market activity, we should be focusing on resolving the impeding factors that are vice-gripping the market’s potentially young population. If amortization laws are revisited, or if market activity ceases to favour some and down-play others, and instead reaches a content equilibrium for the purchasing population, we could expect a healthy and fulfilling market recovery rather than the lop-sided one we’re experiencing now.

 

image courtesy of katerha

The property market’s slow yet steady recovery is not a result of new home-owners entering the market, but instead can be attributed to the purchases being made by investors to capitalize on the market’s vulnerability and the current amortization restrictions, which were tightened up last year. Though the market seems unfruitful for new home-owners, investors are cashing in while contributing to market recovery.

The unfortunate circumstances of the adjusted amortization restrictions (increased down-payments and shortened amortization periods) have resulted in this paradoxical recovery, wherein existing owners are the ones who appear to be scooping up properties at the affordable rate which they’ve been lowered to. Purchasing a second home to reap the benefits of a mortgage that pays itself while increasing equity and (potentially) profiting from the value increase of the property.

New home-owners, as previously stated, are in a bind when considering the adjusted mortgage restrictions. Instead of being able to contribute to the market’s recovery directly, these parties are indirectly supporting its recovery by their participation in the renting of these secondary properties from investors.

The nature of the market’s recovery seems rather cyclical in this sense; investors buy the properties, and potential buyers instead rent from these investors and property owners while contributing to their mortgages and increasing the value of their properties. Unfortunately, this divide is one that may not be sustained for long, as every co-dependent relationship will eventually reach a threshold for its functioning potential.

Without loosening the belt on mortgage restrictions, we can expect this cycle to continue until it flops. Do you feel that the mortgage restrictions should be revised to encourage new buyers to enter the market, or should we continue down this path benefiting only the investors? Share your thoughts with us on Twitter @enviromint.

image courtesy of EraPhernalia Vintage

We often encounter users that find effective passwords difficult to create. Are you one of these users? Don’t worry, not everybody’s an expert at this stuff. But now you can be by using this handy new password strength verification tool from Intel.

Simply click the link to go to the site, and punch in your password to see how strong it really is. Now you’ll never need to worry about password strength again. You’re welcome.

http://www.intel.com/content/www/us/en/security/passwordwin.html

 

image courtesy of marc falardeau