Drop In Oil Prices Likely To Effect All Industries
Gasoline prices have dropped over a course of months and Americans are taking advantage of their good fortune. Although people are rejoicing with less pain at the pump, how does this affect the United States in the long-term? Housing specialists and economic experts are weighing in on the subject with differing theories.
States that are more dependent on oil for revenue, such as Louisiana, Alaska and Texas are hurting. According to Greg Albrehct, Louisiana's chief economist, the state loses $12 million for each $1 decrease in the yearly average price of a barrel of oil. In Alaska, the decrease in oil prices could mean a 50 percent cut in capital spending for roads and bridges.
In regards to housing, economists report that a decrease in oil prices could be both positive and negative. The negatives would occur in states that heavily rely on oil for revenue, which would hurt jobs and the housing market; these are the states that have been the most resilient in housing during the recovery.
On the other hand, in the Midwest and Northeast where careers are less fueled by oil production, housing experts believe this could be good for the economy because it would increase the value of homes. People would save a great deal on heating their homes, driving and more. Mortgage rates may also decline, which could mean good news for housing affordability for many citizens. This could aid in purchase mortgages and refinancing.
The significant decline in oil prices could boost home values in the Northeast and Midwest but decrease them in the states that heavily rely on revenue from oil.
Some property economists believe that any burden on housing that oil-driven states may experience, due to decrease in employment and demand from oil, would be balanced out by the increase in household incomes. This notion combined with the decrease in credit rates means that lower oil rates could boost the housing economy.
While other economists believe that it will take a year or two to really see an effect on housing and shale oil, many real estate experts say mortgage rates will increase this year but are aware that a decrease in oil could alter that. Despite differing predictions, one thing remains true: if oil prices continue to spiral downward, Americans must be aware of the possible implications that can affect the country.
A Quarter Of A Million
More Qualified Buyers In The Next Three Years?
In an effort to make purchasing a home more accessible for first-time homebuyers, President Barack Obama announced on Thursday a reduction in mortgage premium rates which will take effect this month. He says this program will improve the housing market for everyone and could save a new homebuyer approximately $900 per year.
The decrease in insurance rates is meant to help out responsible buyers and make it easier for middle class citizens to own a home and live out the American dream.
The annual fees the Federal Housing Administration (FHA) charges will drop by 0.5 percentage points, according to Bloomberg. Since 2010, the yearly premiums on FHA loans has increased five times.The rates are currently at 1.35 percent and will drop to .85 percent near the end of January.
The FHA is required to keep enough money to cover all of its projected losses in its $1.1 trillion portfolio and must manage a two percent cushion of its value -a level not projected to come until fiscal 2016.
Those opposed to the president's program say the new plan will increase the possibility of taxpayers having to bail out the department in the future. In the news, private mortgage insurers have taken a nose dive because they cannot compete with the government program.
According to The U.S. Department of Housing in Urban Development (HUD), approximately 250,000 new homebuyers will be able to afford a home throughout the next three years.
President Obama believes the new plan should decrease the number foreclosures, increase building development and provide more jobs.