What if the Housing Market Crashes?
There is a balance most of the time in the housing market. There are homes for sale and people interested in buying them. It is strongly influenced by supply and demand as well as given mortgage rates for interest.
Building a home rather than buying one already established is becoming increasingly popular. It allows you to get the place you want where you want it. The downside to this though as it affects the overall housing marketing relating to homes already out there and offered for sale.
Increased Interest Rates
When home loan interest rates go up, it can cause the entire market to crash. This is because higher rates will reduce the amount of home a person can afford. They have to make sure they can fit that monthly payment into their budget with ease. If the payment is too high, a household will struggle every single month to get it paid successfully.
Increased Home Prices
At the same time the rates are going up, the prices for homes on the market may be increasing. This can be a recipe for disaster in regard to the housing market. Sellers will have a harder time getting a buyer when the prices are high and the rate of interest is because it substantially increases the cost of that home over the lifespan of the loan.
As affordable housing becomes increasingly difficult to find, people have to make a choice. They have to decide to pay more and get less of a home. The other option is to rent and to put off buying. As a result, there can be an abundance of overpriced homes on the market no one is making an offer on.
Risky Lending Practices
Some lenders will allow just about anyone to borrow money for a home. They are lending to those with poor credit or no established credit, but at a higher rate of interest. They are also lending more money on homes. This can get many buyers into a mess where they can’t stay afloat and their homes go into foreclosure.
One of these risky loan practices is interest only loans. It allows people to extend the life of the loan and to pay only interest for a period of time. Yet they never do build up equity during those payment periods of time.
Tax Reform
While tax reform continues to be in place with any Presidential administration, it does affect everyone. Sometimes, the tax benefits don’t work out for the betterment of society. They can lead to a housing market crash. Look at the big picture with such tax changes to ensure they are moving in the right direction. Know what is being proposed and let your representatives know where you stand with it.
Economy
Inflation and other economic factors can cause the housing market to hit rock bottom too. This includes the curve in US treasury notes moving in the wrong direction. Mortgage backed securities can crumble very easily. Even when homes are foreclosed upon due to non-payment, it doesn’t mean the leader gets all their money back. They often have to resell it for far less than the outstanding note.
Get the Facts
A seasoned and skilled mortgage broker is going to be aware of signs there is a housing market crash on the horizon. They can assist you with making decisions so you don’t end up in a mess due to these changes you can’t control. They are on top of everything that takes place in the housing industry. They can give you advice and help you make decisions about buying or selling a home.