We are seeing these drastic market shifts is because mortgage guidelines became too lenient. Buyers that shouldn’t have qualified for mortgages, were now qualified. Another factor that added to the real estate mess was that mortgage interest rates fell to historic lows and buyers could now buy a lot more home for the money. More Americans were able to purchase real estate, and demand for housing saw dramatic increases. The amount of available homes didn’t keep pace with the number of new buyers, and real estate values skyrocketed Housing became unaffordable, and more alternative loan terms were introduced to provide alternatives for these people who couldn’t afford mortgages, to temporarily afford homes.
This increase in prices created a real estate investing boom like no other. Some areas saw nearly 50% of the homes being purchased by real estate investors. They flipped these properties for large profits. The economy exploded, home owners took out home equity loans, spent the money, and all was well. But the problem was that the housing growth was created by artificial, irregular causes. Homes wasn’t purchased out of necessity, they purchased them as investments.
Everything changed. Real Estate was not affordable and people couldn’t buy at all. The economy stalled, and borrowers started missing payments on the houses they never should have purchased. Then the overallThe credit market crumbled. Banks failed, and government has intervened to try and right the path that easy financing created.
The Feds efforts to stop a recession have put the market in a situation where mortgage rates are again unrealistically low, but this isn’t fixing the problem because people still fear buying real estate right now, and because it is not nearly as easy to get real estate financing like before.
Inventory is high, and there are more MLS listings than before. For some areas the housing down turn has ended They’ve bottomed out. Inventory is beginning to decline, and real estate values will rise once more.
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