In some of the worst housing markets in the country, deflation has reached double-digit proportions. While housing woes have reached around the country, California appears to be poised to rank among the worse. One of the primary reasons for this is the fact that in the last several months California has experienced the largest rate of deflating home prices. In fact, home prices in California have fallen at levels that have been unprecedented.

Miami, Florida has also proven to be a difficult market at the moment. Here, the weak mortgage market and record high rates of foreclosures have let to decreasing home values as well. In fact, Miami has been among the worst home markets in the country for two years running. The condo boom in Miami just a few years ago has fueled further problems that have now spiraled into a massive real estate bust.

While Florida and California may have been easy to predict as being among the first housing markets to crumble when the real estate market crashed, there are other markets that are on the precipice of falling which have not been as easy to predict. One of the primary reasons that Florida and California were poised to fall so rapidly were rapidly escalating home values during the boom a few years ago.

Other markets; however, did not rise as much or as quickly, which could be one reason why they have managed to avoid reaching the top of the list; at least until now. These markets include Arizona, Nevada, Indiana and Massachusetts. Declining home prices as well as high rates of foreclosures in these states are also contributing to their worsening real estate market conditions. In Michigan, where layoffs have been significant, the economy is playing a strong role.

Problems are expected to grow worse in many markets as several million adjustable rate mortgages are scheduled to be reset in the coming months. As these mortgages are reset, it is logical to assume that even more homeowners will find themselves facing the reality of being unable to pay their monthly mortgage payments in certain markets. When that happens they will be forced to either face foreclosure or in some cases make a short sell on their home as refinancing is becoming less and less of an option for many homeowners.

According to most statistics, the remainder of 2008 is still poised for problems in the housing market. Many statistics indicate that home values could continue to drop and new homes could experience a loss of up to 18% before the year is out. While there are some indications that the market could begin to level off at the end of 2008 or the beginning of 2009, many experts are quick to warn that when the market does begin to rebound it will not reach the point where it left off. In comparison to the housing peak of 2005, the rebounded market could still be quite a bit lower. Part of the reason for this is that in many areas, prices escalated so quickly that there is simply no way for prices to rebound back to that point.

Still, there may be some home for certain areas. In many markets sub-prime mortgages have either left the market through quick sales or foreclosure. The stimulus package that is on the horizon is anticipated to help the housing market in many areas.

First-time home buyers may soon find the relief they have been seeking since they were forced out of the market; however, it may longer before homeowners begin to experience that same kind of recovery. This is because most homeowners are still reluctant to sell and lose the equity they once had in their homes. The simple fact is that many homeowners have yet to accept the fact that they can no longer get the same prices for that was possible just a few short years ago.

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One of the biggest fears of first home buyers everywhere, is that they may never get on to the property ladder at all. This is a real social stigma in Australia where 70% of people own, or are buying their own homes.

The Federal Government’s ‘First Home Owner’ grant that was increased in October 2008 has encouraged a flood of calls to mortgage brokers. Young hopefuls are looking to take advantage of the grant to make that first big step toward a place of their own. Unfortunately the grant ends on June 30th 2009 although mortgage brokers are lobbying for a six-month extension of the grant. There was very little interest in first home buying through 2008 until the grant went up. So it was just the reassurance and encouragement that first home buyers needed to overcome their reticence.

A second equally large fear for first home buyers is the fear of failure. The fear of making a big financial mistake that could end up in bankruptcy and foreclosure. Clare McGrath a 28-year-old laboratory manager put it this way. “Dave and me have wanted a place of our own for years now and have been saving towards it. But how safe were our jobs and what could we afford? How far should we stretch our budget to get a home we would love? The mortgage market can be very confusing and frightening to first home buyers who will probably only buy 2 or perhaps 3 houses in their lives.

Clare again explains. “We did well in finding a mortgage broker who understood our situation and took us through a very complete and interesting financial health check. He helped us look at our incomes and expenses. He gave us good estimates of our mortgage repayments based on our ability to service a home loan. He took into account all of our assets and liabilities and our precious deposit. We had never realized before how much our mortgage depended on so many things”

35% is the magic figure that should reassure first home buyers and give them the best guide to what they can afford with minimal risk of getting into trouble of the foreclosure kind. No first time buyer should take on repayments that are more than 35% of their weekly pre tax income. All responsible mortgage brokers will advise their clients in this way and will use sophisticated mortgage calculator software to judge first home buyer affordability.

To get a first home mortgage loan you must own more than you owe. Lenders will look carefully at your existing assets and liabilities. Assets including things such as furniture, vehicles, savings and investments you may have accumulated over the years. Lenders will look at your credit record to determine whether you are likely to default on the repayments. Factors such as your occupation, work record, where you live and your record as a tenant, are used to build a credit profile. Your credit risk can influence how much you can borrow.

A third fear for first home buyers is getting the timing right for their entry into the market. Many first home buyers held back in the first three quarters of 2008 out of uncertainty and fear that house prices would continue to fall. The First Home Owner grant is definitely reversing that trend. In contrast to this many first home buyers are afraid not to jump in and buy as soon as they are in a position to do so because house price inflation is relentlessly moving affordable homes out of their financial reach. In reality there is some truth and a lot of rubbish talked about house prices generally. The only way for first home buyers to overcome their fears is to get expert advice in the way Clare and Dave did.