Why the Current Housing Glut May Not Lower Property Prices

Many people are confused about why the current housing market is booming. When looking at a few key factors, it’s hard to figure out what the reason for all the feverish activity is.

A large number of homes for sale, almost always foreclosures, are usually the cause of the increased prices. Although there’s some help for buyers, that’s for another article.

A large increase in the supply of homes, coupled with a large decrease in supply is the other reason for the boom. Because, a house that once sold for $500,000 will now sell for $350,000, so the supply of homes has decreased. This leads to an increase in prices.

Another good time to purchase is in the spring. After spring when prices are going up, you could find better deals on homes than usual. However, when the rates have reached a lull, it can be harder to find a good deal.

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Downturns through different cycles

The first few years following the previous downturns had several cycles. So, when we go back and see the homes selling in a slow economy, we tend to take a look at why this time was different.

One theory behind the prices increases and steady population growth is that the economy is coming out of recession. People are still losing jobs, but there are more people in the school to pick up the slack, which gives more jobs to people.

People were in bad economic shape before the credit crunch, but now things have stabilized, and if there’s one thing we’ve learned in the last four years, it’s that you can’t count on history to repeat itself. That is why there are so many home buyers out there.

The weak job market can affect

The very same weak job market that affected the real estate industry so badly in the last recession may have contributed to it. When you consider the average family income is approximately a half a million dollars, it’s clear that no matter how bad the economy gets, homes will continue to be sold.

However, it’s hard to believe that the average salary is enough to pay for a new home, even with the national economy recovering nicely. So, the steady increase in prices may not be a bad thing.

In many ways, the current housing situation is almost like the rest of the U.S. housing history shows. It will most likely have a downturn but will return to normal once the economy is stabilized.

Hopefully, if the current housing glut continues, the boom will be over before it even hits the four-year mark. And, one thing that is clear, it won’t be long before this market comes back to normal, and many more homeowners will get their houses in good shape.