The Truth about the Average House Price in 2009
If you haven’t been watching headlines or nightly news broadcasts you may be unaware of the fact that the average house price in 2009 is expected to decline. While this is not necessarily the case for every real estate market in the country, on the whole, house and property values are expected to continue dropping at unprecedented rates.
What does this mean for homeowners? Well, for those who intend to stay in their homes, this means that they may end up paying more for the home than its actual market value. It could also mean that obtaining funding through such products as equity loans and second mortgages is now out of the question.
Why is that? Because the real estate markets are showing that the average house price in 2009 is heading downward, this means that a homeowner with an existing mortgage may already have zero equity in the home. Equity is defined as the difference between the actual value of the home and the amount in debt against it. For example, a homeowner with a $80,000 balance on their mortgage, and a value of $100,000 on the property would have around $20,000 in equity. They could borrow against this equity in a second mortgage.
Today, however, it is more likely that such a situation is reversed and the homeowner who purchased a house for $200,000 may now own a home valued at $120,000. Because of this a bank would be unable to extend credit against the property.
So, if a homeowner needs some money for a repair or to meet expenses, where can they get the funding? Anyone, even those without collateral like a home, can easily and quickly access a payday loan to get the money they need. A payday loan is basically a sort of advance against upcoming paychecks, and the borrower simply repays the loan according to the agreed upon terms.
Does someone need to submit to a credit check to get a payday loan? No, usually the payday lenders ask a few questions about employment and living arrangements, but do not take a look at a borrower’s credit report. This is a great option for a quick loan for someone who may be viewed by the more “traditional” lenders as a credit risk. This is because they might view someone with no equity in their home as a “maxed out” borrower.
As the average house price in 2009 declines, many consumers who have debts and own homes are also going to experience another unpleasant phenomenon. This is the reduction of their credit line amounts. Credit card companies are allowed to periodically review their client’s credit reports, and if they don’t like what they see they may reduce the amount available to the customer.
This has several devastating effects - first it can often cause the consumer to enter into a period of time in which they are in excess of their allowable amount. This comes with fees and can be noted on the credit report. The reduction in the amount available will also take points off the credit score if the individual is carrying high balances on their credit accounts. This is because the score is created from a variety of factors and the ratio of credit available to current debt is a major factor, so someone who once had a line of $12,000 and a balance of $6,000 can see that 50% ratio increased to 86% if their credit card company reduces their line to $7,000.
With the average house price in 2009 decreasing, the credit markets getting tighter and tighter, and millions of consumers receiving revised terms on their credit accounts, the need for access to funds on a fast and easy basis is becoming more and more necessary.
These are all reasons that people are turning to payday loan options. The amounts available can be very small (often as low as $50) or they can reach $2,000 when necessary. This means that a home or auto repair or emergency purchase are possible, without exceeding credit lines or needing to access the more expensive borrowing options.
What does “expensive borrowing options” mean? Well, many consumers can access cash advances from a credit card account. These are a way of instantly getting cash, but they come with very high interest rates. If the consumer can repay the advance in a matter of weeks the interest should not be of much concern, but the reality is that most consumers will not want to repay the sums borrowed that quickly. Because of this they often repay more than three times the amount borrowed.
With payday loans, anyone is going to get a low-cost way of accessing money that is also repaid in a very short period of time - usually a few weeks or months. This translates to inexpensive borrowing and the elimination of the debt very quickly.
This entry was posted on Wednesday, June 3rd, 2009 at 11:12 am and is filed under Loans & Borrowing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
