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How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

High affordability drives activity in previously struggling markets

Across the country, millions of Americans have acted in the past few years to take advantage of some of the most affordable buying conditions ever seen before. Now, conditions in the housing market are getting to the point that prices are at or have even surpassed pre-recession norms in a number of cities. On the other hand, many metro areas across the country are still a little bit behind when it comes to that type of recovery, but they're moving along in the right direction as well.

Just as a rising tide lifts all boats, increased activity in the national housing market is generally going to be good news for most cities nationwide, even if some lag behind the leaders. For example, San Francisco and New York are now well past the home prices observed there prior to the economic downturn, with both high demand and a willingness among buyers to pay what would have, in the past, seemed like astronomical prices. Meanwhile, though, even major cities like St. Louis, Phoenix, Miami, Detroit, and so on continue to pick up steam but still have a long way to go.

Catching up
The reason the latter group of cities fell so far behind in the first place is that they were hit particularly hard by the recession, and have therefore suffered far greater than the national average in terms of delinquency, default, and foreclosure. All of that can serve to significantly bring down average home prices, making it difficult for even the people who have stayed current on their mortgages to sell. This phenomenon led entire neighborhoods to see property values plummet to the point that even now, after years of recovery, they're not close to where they used to be.

But as demand picks up among consumers – thanks in large part to that economic recovery plus the fact that mortgage rates continue to linger in the low 3 percent range – activity in the more affected areas will also become likely to grow significantly. That, in turn, is good for the entire market.

A bargain hunter's dream
Indeed, if people are still looking to lock down extreme home affordability, rather than the merely "near-historically good" affordability seen in the national market today, the best move they may be able to make is to buy in these more affected markets. The home prices in many neighborhoods remain well below normal and combining that with rates that could soon reach new all-time lows could help them to save potentially tens of thousands of dollars over the life of a loan in comparison with other purchases they could make in today's more active markets.

Affordability is likely to be a real issue for years to come, and that makes sense for people who just went through one of the worst economic periods in 80 years. Consequently, monitoring conditions in the market and making sure a purchase is affordable given their own financial standing is a good idea for anyone now looking to get into the market.

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