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Real Estate Bubble
When people start losing their jobs that’s bad news for real estate, because then they start losing or selling their homes in large numbers, which means there is a greater supply and the demand goes down cause they don’t know what the future holds. When the economy is rocky one of the last things to recover is the real estate market.
Despite the recovery and all of the money that the government has pumped into the housing market it is still at risk of collapsing. Home sales have slid down for the third straight month in a row, which means that fewer homes are selling and foreclosures continue to rise. And mortgage rates are likely to increase when the Federal Reserve ends the program that has kept them down.
So even though there are signs that the economy is gradually improving, the real estate market could really affect the growth that has been occurring. Because people whose equity is steady or shrinking are more likely to reign in their spending and spend less. And this will have an impact on the economy. The federal government has already given a lot of money in order to try and help homeowners but the problems continue to grow.
The government and many companies are trying to take steps to help out the real estate market. Bank of America unveiled a $3 billion plan that would help troubled borrowers. And it will forgive up to 30 percent of their total mortgage balance if the mortgage principal on home values dropped significantly below the amount owed. The bank expects around 45,000 borrowers to qualify for the program.
Government has held mortgage rates down and provided tax breaks to buyers but those programs will soon end and then the market will largely have to fend for itself. However, the federal government just gave $600 million in housing aid to five states including Ohio, North Carolina, South Carolina, Oregon, and Rhode Island. And last month the Obama administration said it would give $1.5 billion to state housing to five states with the highest foreclosure rates including Arizona, California, Florida, Michigan, and Nevada.
States with the highest economic distress that met the government’s criteria were eligible to receive additional funding. The real estate market is really in trouble. There are too many homes on the market and not enough buyers, so many people are just walking away from their homes and the banks get stuck with the homes. There have been a lot of efforts to prevent homeowners from losing their homes that they can no longer afford, but there have been minimal results. The real estate market is on the verge of collapsing and that could really affect the economy’s recovery as whole.
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Author: MargoSmith
Margo Smith earned her B.S. from Brigham Young University. She lives along the Wasatch Front and loves the beauty and solidity of the Rocky Mountains she calls home. She is an eager learner, an avid reader, and a firm believer that people are basically good at heart. Word play is her favorite past time and patterns/tessellations of any kind fascinate her. She thanks her Irish luck - gotta love that gene pool - that she is usually the driver behind the police car, rather than the one in front. Follow her on twitter