Homebuyers Beware: Investment Risk Checklist
Mortgage Match News
By Emmet Pierce
...California markets such as Riverside County and Stockton heated up during the housing boom because they were affordable to commuters who worked in nearby employment centers such as Los Angeles and the San Francisco Bay Area, Follain explains. However, a reduction of jobs in those metro centers and higher gasoline prices now threaten to keep suburban home prices from rebounding for years if not decades.
That could affect the ability of borrowers living in those areas to secure credit. After the surge in foreclosures that has taken place during the recession, mortgage lenders are being very cautious about taking risks in neighborhoods where prices have fallen steeply.
There is nothing new about overheated housing markets cooling off when the economy goes into a recession. However, in this case, the nation has entered the worst economic downturn since the 1930s. Job creation has been weak. The depth of the recession has lead analysts like Gary Painter, director of research at the University of Southern California's Lusk Center for Real Estate, to predict an unusually slow recovery in many areas. Even in communities with good prospects for growth, some submarkets may remain well below the home-price peaks of the housing boom for years to come.
"What is different about this recession is housing demand is likely to be weak for a while because unemployment rates are high," Painter said...