The Real Estate Bubble
Years ago, the prices of buying a home were high, while home sellers receiving somewhat of a profit on their home because they were valued high due to a great economy. During this time selling a home on the market was a piece of cake, it seemed as if buyers were competing with another and the offers just kept coming for those sellers. Fast forward to the year 2005 and that is when we saw the peak of the housing market. From 2005 to the present time, we now see a housing market that has a growing number of foreclosures, a multitude of listings that are not selling, and an increasing number of people are not interested in buying a home, but are renting instead simply because they cannot get the funding. The big question is what happened to the real estate bubble?
The weak economy is mainly to blame for the current conditions of the real estate market. With more people out of jobs, losing their jobs and the mounting debts that accumulating, people are having their homes foreclosed on. Those lucky few who are trying to avoid this are forced to sell their homes for far below what they are worth just so that they can come out a bit ahead in the end.
We have all heard about the so-called credit crunch that the United States is in, and we can thank this problem for being yet another aspect that has contributed to the current real estate conditions. Lenders are having to sink more and more funds into properties, as they are losing out on payments, due to the weak economy and people just simply not having the funds to pay. Because of this, lenders are unable to give out new loans to those interested in buying, thus those interested, simply rent instead.
Those who do have their homes on the market are sitting on the houses just hoping that they sell soon. If not, they face a worse financial situation than what they are currently in. However, since buyers cannot get the funding and the professionals in the real estate world do not see the market value of homes increasing any time soon, potential buyers see buying a house as a risky decision. Due to this, the government has been giving numerous incentives to get the housing market going again. They are offering end of the year tax returns of up to thousands of dollars for those that purchase their first home, while the lenders are promising low interest rates. But, it just does not seem to be enough to get the housing market out of the slump that it is in.
Many people believe that the housing market blew its fuse due to the war in Iraq. This has contributed to the weak economy due to the spending that is having to be done in order to sustain the military, however, the blame cannot be entirely placed on the war. Instead, it is a combination of all of these factors that led to the housing bubble popping, we cannot look at a time line of occurrences in the United States, and pick a point and say, 'That's it that is what made the housing market into what it is today'. It is simply not possible.
What can we expect for the future? Well, taking into consideration what professionals and analysts are predicting, it will not be getting any better any time soon. Those in real estate are terming this a buyer's market with the price of houses low, which is true. However, from an overall point of view, the market really is no man's land. No one is really coming out ahead, despite the low interest rates and incentives that are being offered. With the economy in the shape that it is, potential buyers really have no idea if their job will be there in the next few years, and since mortgages are typically anywhere from fifteen to thirty years in length, this could put them in a financial bind.
So for those that are hoping to purchase a home in the near future, keep dreaming. Until the economy starts to increase, which it will eventually. However, no one really has a straight forward time line on when this will occur. Until then, we are stuck in the real estate bubble that we are in. In hindsight, we should have seen a downturn in the bubble coming, given the success that the real estate market had in previous years, but as they say hindsight is twenty twenty.
Is there anything that we can do in order to improve the bubble? In order to improve the bubble we are going to have to improve the economy. This is easier said than done, and thus far, there has been little evidence that the ideas that are being put into play are working out. However, at least there is an effort being made, and we will see results one day. However, as far as to what an individual can do in order to improve the economy, there is really nothing that one person can do. We can do our part to make sure that our finances are stable, but that is about it.