Short sales and new government programs

The U.S. housing market remains deeply depressed and housing prices are continuing to go down every month. So far the crisis has claimed over $6.5 trillion reduction in value of the housing market. But there are some signs of lender participation in order to prevent further home foreclosures. Lenders are more and more willing to accommodate short sales instead of foreclosure.

In a short sale lender is willing to accept less than the remaining loan balance. This facilitates a quick sale of a home and protects the value. Lenders in California, Nevada, Florida, Arizona and New York are even provides financial incentives worth over $10,000 to home owners to move out.

The Federal programs are also enticing the upside down homeowners. The Home Affordable Refinance Program (HARP) launched earlier and new HARP 2.0 reintroduced in October 2011 is opening refinancing capabilities to more and more underwater home owners. Additionally, the Home Affordable Modification Program (HAMP) is intended to reduce the monthly mortgage payment to no more than 31% of the home owner’s pretax income.

The drawback of glut of short sales is that it can lead to oversupply of units in the market further depressing the values.