First-Time Home Buyers and Boomers Feel Effects of Housing Downturn Most

Although the situation is open to interpretation as well as change, there are growing concerns that the effects of this economic downturn could have a long-lasting effect on the housing market.

A study by the Mortgage Bankers Association, conducted by Kentucky economics professor Joe Peek, concludes that “the current financial crisis and recession exceeded the devastation created by other post-World War II recessions.”
Saving rates have risen substantially. Many Americans will continue to cut spending sharply out of necessity, “others out of fear of what the future holds,” Peek said.

When it comes to housing, he said, it was unlikely that the dramatic rise in loan delinquencies, foreclosures and bankruptcies would show a “meaningful” decrease in the foreseeable future.

“High unemployment and low house prices are widely projected to remain for an extended period, as well as the rise in problem loans at banks that will restrain their willingness and ability to provide credit,” Peek said.

Two groups expected to feel the pinch the most are young first-time buyers and the so-called active-adult purchasers who downsize as their children grow and move out.

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