How does the Current Economy affect the Real Estate Market?

Published: 18th February 2010
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The real estate industry is a big part of the economy. The industry also relies on the economy in various aspects. This is why the changes in the economy definitely affect the changes in the industry. The challenges faced by the economy also affected the industry especially in the recent year. The turmoil brought by the down economy was also deeply felt by the industry.

In the past, investors turn to real estate for security when the economy is bad. They pull out their stock investments because their values go down. Investing in real estate seemed the more viable thing to do because the assets were more tangible. If anything happens, the investors will still have the property. However, that is not the case in the past few months because of the problems faced by the industry.

The industry suffered a lot of problems. It is among the industries that have been seriously hit by the recession. Many homeowners are losing their home. The problem did not end there because the industry faced a lot of other problems.

There are different events that lead to the down point of the economy. This is the product of many unwise choices made by individuals, companies and even the government. Many individuals solely relied on their credit cards and not paying substantial amount when the monthly bills came. Many also have huge mortgage loans. Even the companies relied on credits a lot. This seemed to work. However, the problems start to surface along with other problems leading big companies to shut down and file for bankruptcy. The employees are the first one to feel its effects. Many lost their jobs and gained the inability to pay the monthly dues including the mortgage.

Due to unemployment, many defaulted on their mortgage obligation, which ultimately led to foreclosure. The number of homeowners who is losing their homes to foreclosure has definitely grown. In addition to that, more and more homeowners are trying to sell their property to avoid foreclosure. This makes it more difficult to sell. The competition in the industry has caused the value of the properties to decline. What makes it more difficult to earn by selling the property, is the limited number of buyers. Fewer people are shelling out cash for homes.

Consumers are avoiding home purchase because of the state of the economy. Additionally, their confidence that it will recover is at all time low. Moreover, even if they are willing to make a purchase, they cannot because they lost their job. Some, on the other hand do not want to spend unless the recession is over because they do not know how long they will keep their job.

The state of the industry also paved way for the new opportunities. There are many homeowners who prosper because of tenancy. More and more families are looking for a property to rent. Investors are also able to purchase more homes because they are cheaper today.

The real estate industry also changed for the better. The processes for applying for a loan and purchasing of properties have been amended to better protect the consumers.

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