Hopes of a housing recovery in the second half of 2011 were dashed when low consumer confidence, high unemployment and the debt crisis debacle were exacerbated by Standard & Poor’s downgrade of the United States’ credit rating. In August, S&P demoted the U.S., Freddie Mac and Fannie Mae (two government-sponsored mortgage entities) from AAA ratings to AA+.

The first-ever downgrade of the U.S. was expected to cause interest rates to rise. Instead, it had the opposite effect. Low interest rates have set off a new surge in refinance applications, but it has done little to help most homebuyers who can’t qualify under current strict lender requirements.

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