Flattening Home Prices Spell Trouble for First-Time Homeowners

Feb 15, 2005, 00:00 ET from RealEstateJournal.com

    PRINCETON, N.J., Feb. 15 /PRNewswire/ -- The end of the housing bubble
 could mean substantial losses in home value for millions of Americans, reports
 RealEstateJournal.com, The Wall Street Journal's guide to property. Housing
 prices, adjusted for inflation, are up 36% since 1995 -- the steepest boom in
 at least 50 years -- according to the Center for Economic and Policy Research
 in Washington, D.C.
     Although the overall economy could bear a flattening or modest decline in
 house prices, many young Americans -- who were encouraged to buy homes because
 of low interest rates or government homeownership programs for low-income
 individuals -- could experience financial hardship when the housing bubble
 bursts. And, if interest rates rise, some buyers who stretched their
 purchasing power with adjustable-rate loans and interest-only mortgages could
 face financial problems.
     "As long as prices remain near today's levels, most homeowners will still
 have a lot of equity against which they can borrow to finance other types of
 spending," says Valerie Patterson, senior producer, RealEstateJournal.com.
 "However, if housing prices take a nosedive, many families would be unable to
 sell their home for enough to pay off the outstanding mortgage."
     RealEstateJournal.com offers this advice for potential homebuyers:
      * Figure out how much you can afford before looking at a property.
      * Try to put down at least 20% of a home's cost.
      * Borrow what you need to borrow, not what you can borrow.
      * Understand your arrangement with your real-estate agent.
      * Hire a lawyer who is familiar with real-estate contracts.
     For more real-estate guidance and advice, visit
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SOURCE RealEstateJournal.com