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A Homeowner’s Guide to Post Bubble Real Estate: Five Steps You Can Take to Better Protect Your #1 Investment

by LiveModern Webmaster last modified Oct 04, 2012 01:01 AM
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by last modified Oct 02, 2012

Five Steps You Can Take to Better Protect Your #1 Investment



Whether you already own a home or are planning to buy one, you are certainly familiar with the housing bubble.  Fueled by easy credit, it grew from 1997 to 2006. According to the S&P/Case-Shiller national home-price index, during those years the price of an average American home increased by 124%*.

But when the housing bubble began to deflate, things turned bad very quickly. According to The Joint Center for Housing Studies of Harvard University, between 2006 and 2011, housing wealth in the U.S. fell by as much as 57%, with homeowners losing a staggering $8.2 trillion.

In April, The New York Times wrote that from the beginning of 2007 to early 2012, “roughly four million families lost their homes to foreclosure”. It also reported that, “Tens of millions of others found themselves in homes worth less than their mortgages, unable to sell or refinance.”

There is no doubt but that the bubble was – and still is - a major fiasco.

Thankfully, however, bright spots are starting to appear. In the second quarter of 2012, home prices rose ever so slightly for the first time since 2007. On another positive note, researchers at Harvard’s Joint Center for Housing Studies found that “the number of loans 90 or more days past due fell almost steadily from 2.3 million at the end of 2009 to 1.3 million in the first quarter of 2012.“ Additional upward pricing pressure stems from historically low interest rates and home prices that have reset to their lowest level since November 2002. More recently, the Fed’s commitment to purchase $40 billion of mortgage-backed securities per month until the job market improves, while holding interest rates low, provided more good news for homeowners and buyers.   

Even without those market upticks and boosts, there are more fundamental signs of increasing demand. According to the Harvard University study, projected immigration rates “should support the addition of about 1.0 million new households per year over the next decade.” The study also points to the maturation of the echo boom, children of the baby boom. It finds that, as this generation comes into its own, it has “the potential to spur new home demand to an even greater extent than its parents did beginning in the 1970s.” Indeed, with a bit more economic stability, experts believe that housing is well positioned for a turn around.

Still, in a changed housing market, questions remain. How can homeowners and homebuyers best protect their interests? Where is demand going? And how can you make sure that you’re moving in that direction? Given current real estate trends, we propose that the following five steps could help you better protect your investment in a home.**




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