Sep 10
17
The Economy and the Housing Market
The rise and fall of the economy is often related to the overall consumer spending. More spending seems to drive prices up, resulting in a thriving economy. Small corrections are always present regarding the economy to keep it in check, which is essential as if these corrections did not take place, prices would soon climb into numbers that would be relatively unaffordable for most United States citizens. As with the recent recession in the US, consumers were concerned about the never-ending price increases in the housing market. Many people were buying home they just couldn’t afford and eventually, their balloon payments became too much to deal with and ended up in foreclosure. They were even forced to borrow money in the form of payday lenders to pay high payments for half-million dollar homes, a spectacle indeed. This overspending in the housing market led to a collapse and dropping prices. They actually bottomed out and many people were stuck with homes they were underwater with as far as mortgage payments were concerned.
When you owe more than your home is worth, you are considered underwater on your mortgage. Many home buyers expected to buy the home of their dreams with little money down and adjustable rate mortgages. As the rates started to adjust, they had hoped to sell the home for a nice profit. This idea was great in theory, but never happened. The home continued their downward climb and many had no choice but to short sell the home or simply walk away, which further dropped home prices because it was no longer enticing to live in a nice home in a neighborhood of empty homes. Those who had to foreclose also didn’t take care of the property, so the neighborhoods that were previously well-manicured looked horrendous. Eventually, prices will go back up and stabilize, but until then, we will most likely see more foreclosures.
