The recent and subsequent international economic recession has wrecked the real estate business to its lowest, great real estate magnate companies like Fannie Mae and Freddie Mac have made losses to the rescue of the Federal government. The housing industry has seen a sharp increase in bank interest rates and many have lost their homes due to the shaky economy. Really, the housing industry has faced hard times. In spite of all this, industry players are optimistic of a future full recovery and the government is pushing for policies and plans of recovery. An example is the Home Affordable Refinance program that is looking forward to help homeowners who can pay their loans but cannot refinance at today’s record low because their homes’ values have lost ground. At the same time, the Federal government is pushing for the passing of a crucial bill to put measures that stabilize the interest rates and safe the investment of homeowners (Los Angeles Times, 2012).
Much is to be understood on the thus shaky industry, the California real estate is not different. From the recent real estate department reports the state has had major housing investment decline due to the increased bank interest rates and increase in the prices of both land and essential building materials and labor. The housing development indexes, investment ratios and analysis refer a great decline, and many homeowners are losing their houses and loans; they have been defaulted. The market trends, social changes and financial insights have a systematic pattern that should be controlled and managed effectively, (Kathryn J. Hapt, 2006).
Indeed much has happened and hence its better the future of real estate be evaluated as soon as possible to realize the impacts and the benchmarks that should be compromised to achieve a stable industry that will protect all stakeholders and satisfy investor’s concern.
A sound and stable housing industry is a baseline of financial stability, so it’s important, the basic issues that may protect homeowners from the feeble rather wonderful periods (the era of housing bubble) that will affect the industry much later. Threre are number of issues that should be solved and implemented to ensure a considerable housing sector.
Like the ever-fluctuating stocks and unstable oil prices, housing prices are surging as such system. Hence, the underlying forces that affect the prices and cost of the housing industry should be monitored.
Main forces of the housing industry presented as discussed below
A. Currency stability
At the hearth of any economy, a stable and rather strong currency is important. Then, when the currency destabilizes it affects the import and export activities, which in turn affects the prices and distribution of goods and services. At the same time dollar makes a goods expensive because most of goods are traded in dollars. The basis of an engaging currency is bond and share market; hence, the bond and share movement is very important. Recently the world has seen major Europe economies stumble and their listed bonds lose value, back at the country, the Federal Reserve is taking measures to maintain a market reality. An example is the increase demand for Treasury bonds, traders are engaging in bond buying as they expect the Federal Reserve top buy bonds to juice the economy. This may lead to increase or decrease in the dollar trading that will affect house costs and prices (New York Times, 2012).
B. Mortgage fees
The basis is the investment from the banks. Homeowners are considering leaving this option because of the constant change of rates and increased of charges based on the size of the loan. This engaging issue is demotivating homeowners and potential homeowners on taking the most important prospect to own homes.
The Consumer Financial Protection Bureau, which was created earlier 2010’s attempt to reorganize the basics of the mortgage is working but more needs to be done. The agency is in the process of considering new laws on mortgage fees and even bans the origination charges based on the size of the loan. The new rules are poised to make easier for potential home buyers to evaluate the mortgages by comparing and contrasting the rates and they are also proposing that brokers and loan officers undergo criminal background checks and through special training (Reality Times,2012).
The new proposal is looking at requiring flat original fees so that customers could easily compare the available mortgages, this is because the amount of work required to originate a loan doesn’t vary hence the origination fees shouldn’t either vary or be available. The agency is also considering making changes for discounting some points, a form of prepaid interest to defend customers from deceive as for how much of the break they are getting. In addition, at the same time there are proposals to consider points required for one to be considered in reduction of one’s loan interest rate. This will require lenders and brokers to offer consumers a loan without discount points to enable better comparison-shopping. In the long run, the agency is working on standardizing and screening qualifications for people who originate mortgages in order to level a well suited field between all stakeholders.
C. Government policy and regulation
It’s very important that the real estate industry should have an exclusive law and policy to protect the stakeholders and empower the industry activities. The California real estate department has set required regulations on the acquisition of real estate licenses by the brokers, sales person, officer and another relating to real estate. Application and passing of real estate examination, fingerprint requirement, proof of legal presence and license terms, and such law provisions are available to elect the Business and Professions Code.
Hence, by these laws are the pillars of the real estate professionalism, but the state should look on to waiver license provisions to certain real estate dealings that require certain general and specific duties from a broker. The original sales person and broker licenses regulations and processes should be implemented to ensure security and curtail the current trend of fraud, theft and swindling of homeowners investments.
At the centre of mortgage deals, there is the loan originator, an individual who negotiates offers and takes loan application for compensation. The ethics and qualification of such individual should be improved on terms of offering enough and professional information to potential buyers so that future problems are thwarted and exterminated. Usual, the contracting is simple but complicated in the long run, hence the potential home owners should be given much insight and legal counsel before this process to eliminate contract problems and representations. Indeed regarding real estate professionalism, stakeholders should be taught and educated regularly on the current trends and laws in the industry so has there maybe awareness and more education to avoid situations of crime due lack of knowledge. The Federal Department and the State Department of Housing and Development are adopting a policy based on increasing constant regulation and revision of real estate laws and practices in order to expand the real estate industry.
The Consumer Financial Protection Bureau has increased more regulation licensing and controls on the points and rates of real estate services. This move is likely to ensure stable lending rates, lucrative discounts and land reviews (California Department of Real Estate).
Land has become a problem due to the laws prescribed by the state and the prevailing costs that are sending investors away. The state should improvise on laws of land subdivisions and rates so as to manage the costs and availability of land.
Even when the Federal as provided the Home Affordable refinancing program that reaches to encourage investment and reduce rates, they should provide more laws on regulation of the same rates and management of odd housing periods [the bubble housing].
D. Market rates and Trends
The market trend are based on the current social, economic trends and housing options. Since this is thought, economic periods of the real estate have not been faring well. The soaring cost of living has affected the considerations of many potential homeowners. Evidently, many have shielded and put aside their housing plans due to high lending rates and costs, which are available and considering renting and even companies leasing properties for the fear of the shaky housing industry (Harvard business Review, 2012). These trends are to change in the future as the President Obama’s Refinancing program and the recent low lending rates have signified some changes. Basically, the state and government are in the position to enact policies and sow incentives in the market that may change the available trend. The financial ratios and analysis on the current real estate market are contemplating a strengthened sale prices and low mortgage rates hence there is a say, that home’s price may raise by 4% a year.