With the housing market having taken a big hit since the sub-prime mortgage crisis, all eyes are looking to the US housing market for signs of recovery. It however, seems that house prices in America haven’t yet bottomed out meaning that we have some way to go yet before we see an increase.
One contributing factor to the low costs is high unemployment. With high unemployment, much of the people simply does not have the finances to spend money and purchase homes, something that would always have an adverse impact on any market. With house prices already low, spending and investment is required in order to push costs back up once more, however until the money is available to spend and invest, this will not be happening.
Another aspect that is keeping house prices low is that there is a high inventory of unoccupied properties, and new properties are still coming onto the market. If there are numerous properties available for sale, then the high supply will outstrip demand causing a further dip. In market environments like the one we are in at present, the buyer has greater influence and buyers typically would like to pick up a property at the best possible price for them. When a home owner is looking to sell their home then having fewer options would mean that they are more likely to have to settle for a lower price. With more potential buyers, they would have more bargaining power and can usually hold out for a better price.
Before the market is to rise, it would first have to find its bottom and become stable. This will encourage prospective buyers who are seeking to enter the market at the best possible moment so as to augment their future profits. It is unlikely that buyers will begin to get into the market any time this year, as the housing market is expected to continue to drop over the next few months or so. With a few analysts predicting that home prices may drop by another 10 to 15 %, we could see a substantial amount of downturn before we would be able to expect to see things pick up again. Additional estimates claim that when the markets reach their bottom, it could take another 10 years for them to recover meaning that it could be a decade before we saw the sort of housing market that we were seeing before the crisis.
Incentives such as the first time buyer tax credit have turned out not to be as successful as was hoped. Although sales figures increased during the period, it was found that instead of actually increasing the quantity of home sales, it just encouraged prospective buyers to bring forward their purchase from later in the year.
With more foreclosures projected which would further add to the inventory of unoccupied buildings, a slow-moving economy and buyers still biding their time before purchasing, it could be a while until we see house prices rising again.
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