Archives - Business: Page 13
Author: Thrty2Mars (Wed Oct 11, 2006 9:49 am)
Title: The End of the Housing Boom
For anyone who said the housing bubble doesn't exist, I believe the truth is clear. The median housing prices dropped by 1.7% since last year, recording the first such drop in nearly a decade. This is further bad news for sellers with large houses and sticky prices. Experts have speculated that the first sign of slowdown would be demand, not prices, for economical and logical reasons. Logically, sellers will be unwilling to take a reduction in price, even when demand starts tapering off, because they want the large profit they had in mind. Economically, the market has grown drastically in volume and value, resulting in receding demand. Sellers are finally coming to terms with the reality of the current market; thus, the price decline begins.
This most recent housing boom was the largest the United States has ever seen. We saw the value of real estate more than double from 12 trillion to 25 trillion in the last 10 years or so. Experts aren't sure how far the prices will fall, but they are sure of what effect it will have on the economy first. Real Estate professionals will be the first to feel the heat as demand falls further because there will be less need for their services. Also, as housing prices drop, their percentage of profit from sales will decrease as well. Researchers believe that although the wealth effect has increased as a result of rising home values, the bursting bubble will not cause equal damage to consumer spending on the way back down. This is good news for our economy as a whole, although I wouldn't want to be a real estate major these days.
No one is buying right now but I personally believe people should be buying. If Everyone waits a couple of months they will be able to get property for dirt cheap. As long as they hold on to it for a couple years and weather the taxes they will be able to turn a beautiful profit. This is a great time for anyone looking for commerical property as well. My mother had a property appraised for 230k and within a week of the bubble burst people where calling and asking for the property at prices below 170k.
Yes, this is a good time to buy a home from the price standpoint, but now we are seeing a lack of funding sources. Lenders are getting hit hard by defaulting loans because the borrowers can't make the payments. Because of this, they are only lending to very good credit risks and with less than desirable rates at this time. I think if a buyer were to wait a few more months, the conditions would be better for purchasing a home.