The US real estate market has witnessed the most adverse effect of great depression of 2007. However, in the year 2010, slow but steady signs of revival are seen in the housing market.

Role of government to recover the real estate market

The US real estate market in 2010, is seen to be recovering from the effect of recession, but, it to attain full recovery some more time is to be needed. In the mean time, the Obama government has introduced an emergency plan, called the Homeowner Affordability and Stability Plan (HASP) to pull through the housing market. Some of the features of this plan are:

• It encourages lenders to participate in the plan and in turn the government will pay them an incentive of $1,000 for each modification. They will also get an additional amount of $1,000 payout every year upto three years, till the borrower continues to make the payments.
• The lenders under this plan will not be able to exceed their monthly mortgage repayment amount to more than 38% of the borrower’s monthly gross income. The government has also asked the lenders to reduce the interest rate, so that the monthly payment of the borrowers becomes lower.
• The borrowers, till they continue to make payments, will also get $1,000 waived off from their principal loan amount each year upto 5 years. To get this incentive the payments have to be made for at least 3 months.

Main factors that shape the US housing market

The factors on which the US housing market depends are:

• Interest rates
• US economic growth (GDP growth)
• Growth of job rate (quality, location and quantity-wise)
• Shifts on global capital flows
• Growth in consumer spending
• Market structure in bank and private lending institutions
• Government policy on housing finance

Already six firms have agreed to participate in Obama’s USD$75 billion mortgage bail out program. These companies will receive USD$9.9 billion as incentive payments. However, the qualifying norms to get the loans have been quite rigid, as a result, not many homeowners are taking advantage of the program. It also has not put any provision for “underwater homeowners” (homeowners having negative equity on their property).

According to some economists, it will still take several years for the full recovery of the US real estate market, but the positive signals can be seen which implies that the US real estate market will soon come back to life.