The governmental policies have a major role to play in the Industrial sector. Any changes that take place in the government affect the whole Nation. So the changes in the government fees have deep impact on the real estate and mortgage industry as well. Many residential builders have stated that the excessive charges of the municipalities to offset the cost of development result in higher home prices. As a result the lower income buyer cannot take part in this rat race and is forced out of the housing market.
The rates of house prices are always fluctuating in the market. Real estate industry, in the recent years is booming in all its five different sectors - Residential, Commercial, Retail, Industrial as well as Investment. We can witness this through economic indicators like stable rates, falling dollar, changing demographic trends, rising stock market. Recently, the wavering housing sale is expected to leave a deep trace in housing prices.
A recent study reveals that 80% of the home buyers purchase using mortgage. In California 0.8% of the total of 597,597 households can afford a median-priced home that cost $849,022. The hike of $1000 in house prices will automatically cut 313 households. In the Salinas, California 3.5% of 123,630 households can actually qualify to purchase a median-priced new home at $669,091; a price increase eliminates only 31 of them. On the other end, in West Virginia 66.9% of 125,779 households are eligible for a median priced house which cost $85,804; raising the price by $1000 will cut 463 households out of the market.
The government fees indirectly control the community impact to the real estate and the mortgage industry. This may be in the form of a drop in federal and state funding, changes in the tax-exempt-bond, and even unwillingness of the public to pay higher taxes for services necessitated by development. If there is an increase in the home prices the government fee itself will be increased. Recent study shows that the construction financing cost and real estate agent fees rose to about 22%.
The increase in the construction fees of $819, an average annual interest rate for construction financing of 10% and the total time span from the authorization to the sale of the property would add another $80.54 to $819. This will in turn add up to the average brokerage fee to about $23.75, and the builder's compensation and the profit of 9.30% to an approximately $76.17. This adds to a total of about $999.45.
However, mortgages in 2007 are very promising. Since 2004, The Federal Reserve Board (The Fed) raised the fed funds rates which would in turn influence mortgage rates. The fed-fund rate was raised to about 17 times, upping it from 1% to 5.25% as a result the housing market slowed down. There are speculations that The Fed might soon cut the rate. But this may lead to a decrease in home sales.
The road ahead in housing market looks promising. It is anticipated that this year the house market will perform better, unless employment drops or the Federal Reserve is compelled to boost interest rates.