There is much in the news today about the effects the housing market is having on the recession, but there are a few facts that are often overlooked by the media.

While it is true that the median price of an existing single family home actually did drop by 1.8% from 2006 to 2007, it is important to put it into context. Over the previous six years, the typical length of time an owner stays in one home, the median price has risen nearly 40%. Those owners simply gave back a small percentage of that gain, still leaving them with a very handsome appreciation rate.

Mortgage interested rates today are hovering around 5.5% and lower, about the same as they were 45 years ago. Interest rates on fixed rate and adjustable rate mortgages have been trending down. Falling rates do not portend a recession.  Interest rates on jumbo loans, however, remain well above the conventional mortgage rates, as they are above the Freddie Mac and Fannie Mae limits. Therefore, it isn’t surprising that the share of single-family homes selling for more than $500,000 fell to 12.4% in early 2008 from 14.2% just a year earlier.  This could also account for some of the drop in the median price over the past year.

Low mortgage rates trump the job markets during a recession. The last recession was in 2001 and the Federal Reserve was cutting rates, and mortgage rates were falling. As a result, home sales began to rise sharply.

Past deep housing recessions were accompanied by prolonged job losses and rising interest rates. We have falling interest rates today.

The economy added about 4 million jobs over the last two years preceding the recession. Household formation is about half of what it should be given the employment growth, which indicates that many buyers are sidelined now.

When the housing market begins to recover, this will signal the beginning of the overall economic recovery. We have historically low interest rates, while higher interest rates have been characterized in past recessions. The National Association of Realtors predicted economic expansion to slow in 2008, but the bottom line is, with lower interest rates we are likely to avoid a deeper recession.

For information about real estate trends in your local community, please contact your local real estate experts; The Rachel DeHanas Team at 301-870-1717 or 1-800-842-0190, or visit their website at www.DeHanas.com.

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