This new real estate market the U.S. is currently experiencing is thwarted with unpredictable components of price, sales and affordability.

During the last market period, home buyers knew they should buy because homes were appreciating at a steady rate and were going to continue to do so. No one really knows what the current market is going to do.

The article, “Freddie Mac economists see housing markets nearing floor” posted on Inman News on October 13, 2006, explains how the current market appears to be slowing appreciation will lead to more buyer affordability in the near future.

“Economists at the government-sponsored mortgage repurchaser [Freddie Mac] warn that there ‘will undoubtedly be more bumps on the way’ and that the ‘ride could be rocky in some markets.’ But solid economic fundamentals ‘should help avert a crash landing.’”

The economy is already on the right track to gaining a solid foundation as energy and gas prices have been steadily falling. According to Freddie Mac, consumer spending has also kept up its annual rate even despite a reported 30 percent less withdrawal in home equity accounts.

More direct factors are contributing to reviving the economy as well as the overall real estate industry.

“Mortgage rates are down 50 basis points from highs this summer, hitting 6.3 percent in early October. That's prompted a rebound in refinancing applications, as homeowners with adjustable-rate mortgages lock in lower rates for the long run.”

“As the gap between fixed and adjustable mortgage rates narrows, the ARM share of the mortgage market is forecasted to drop to 17 percent in the fourth quarter of 2006 and remain there throughout 2007.”

Mortgages applications and originations have rebounded to level similar to those in 2003, when the housing market was still thriving, Freddie Mac reported.

As mortgages become more affordable, so does a home. Lowering interest rates and an abundance of homes has allowed prospective home buyers to pick and choose the property of their dreams, while negotiating price.

Home prices are lowering regardless of whether a buyer negotiates with the seller. There is too much of a supply for the current demand, which means that prices must drop drastically to generate sales and support the economy.

“Home construction, down an average of 3.4 percent in the first half of the year compared to last year, could be down nearly 20 percent in the second half. Home sales are expected to decline by 9 percent from 2005 to 6.8 million units this year, and slip further to 6.4 million units in 2007.”

Construction is down, sales are down; affordability will go up.