Learn why 9 3 top real estate bubble is about to explode before it's too late!
If you own real estate or are considering buying real estate, then you better be careful because this could be the most important message you receive this year regarding real estate and financial future.
The past five years have witnessed an explosive growth in the housing market, so many people believe that real estate is the safest investment you can make. Well, this is not true. Rapidly rising real estate prices have driven the real estate market at price levels never seen in history when adjusted for inflation! The growing number of people concerned about the housing bubble means there are fewer actual buyers of goods available. Fewer buyers mean that prices are falling.
On May 4, 2006, said Federal Reserve Governor Susan Blies that "housing is really sort of peak." This follows on the heels of the new Fed Chairman Ben Bernanke said he feared that the "softening" of the housing market will hurt the economy. And former Fed Chairman Alan Greenspan previously described the property market as frothy. All these top financial experts agree that there is already a decline in viable the market, so it is necessary to know the reasons for this change.
3 of 9 main reasons why the housing bubble will burst include:
1. Interest rates are rising - foreclosures are up 72%!
2. time buyers are priced out of the market - the housing market is a pyramid and the base is crumbling
3. Market psychology has changed, now people are afraid of the bubble bursting - the mania over real estate is more!
The first reason that the housing bubble is filled with a rise in interest rates. Under Alan Greenspan, interest rates were at historic lows in June 2003 to June 2004. These low interest rates cause people to buy homes that were more expensive than they could normally afford but at the same cost per month, essentially creating "free money". Time, however, the low interest rates has ended as interest rates have risen and will continue to grow further. Interest rates must rise to combat inflation, partly because of gasoline and food costs. high interest rates more expensive to own a home in order to drive home values ??down.
higher interest rates also affect people who bought adjustable mortgages (arms). Adjustable mortgages have very low interest rates and low monthly payments are the first two or three years, but then disappears at low interest rates and monthly mortgage payment jumps dramatically. One result of resetting Adjustable Rate Mortgage, home foreclosures, and 1 quarter of 2006, 72% in 1st quarter of 2005.
foreclosure situation will only worsen the interest rates continue to rise and more adjustable mortgage payments are adjusted to higher interest rates and higher mortgage payment. Moody's indicated that 25% of all mortgages outstanding future for interest rate resets in 2006 and 2007. It's $ 2 trillion of mortgage debt of the United States! When the higher payments, it will be quite a success in the pocket. A study by one of the largest title insurers have agreed that 1.4 million households will receive a break fee of 50% or more once the introductory payment period is over.
The second reason why the housing bubble bursting is that new buyers are no longer able to buy homes because of high prices and higher interest rates. The housing market is essentially a pyramid scheme and while the number of buyers is increasing so good. As homes are purchased by first-time buyers in the bottom of the pyramid, the new funds for this $ 100,000.00 home goes all the way up the pyramid with the seller and the buyer of a $ 1,000,000.00 home as people sell a house and buy a more expensive home. This double-edged sword of property prices and rising interest rates has priced many new buyers in the market, and now we're starting to feel the effects in the housing market in general. Slower sales and inventories of homes available for sale are increasing rapidly. The latest report on the housing market showed new home sales fell 10.5% in February 2006. This is the biggest monthly drop in nine years.
The third reason that the housing bubble bursts, is that market psychology has changed real estate. In the past five years, the housing market has increased significantly, and if you bought real estate more than likely made money. This positive for investors as the market supply more than most people saw it and decided to also invest in real estate before it was "lost."
The psychology of a bubble in the market, if we are talking about the stock market or housing market is known to "herd mentality" that when everyone follows the herd. This herd mentality is at the heart of any bubble has happened many times in the past, even during the bubble in the U.S. stock market the decade of 1990, the Japanese property bubble of the decade of 1980, even as the bubble of U.S. railroads in the 1870's. The herd mentality has taken the entire real estate market until recently.
The bubble continues to grow as it is a "more crazy" to buy at a higher price. As there is less and less "crazy", or willing to buy homes, the mania disappears. When the hysteria passes, the excess inventory that was built during the boom time causes prices to fall. This is true for all three of the historical bubbles mentioned above and many other historical examples. It is also important to note is that when all three of these historical bubbles burst the U.S. was thrown into a recession.
With the change of mind regarding the real estate market, investors and speculators were concerned that real estate is that they are losing money. Consequently, not only are they buying less real estate, but they are selling at the same time their investment properties as well. There is a large number of homes available for sale on the market at the same time that the record of new home construction is flooding the market. These two increasing supply forces, the increased supply of existing homes for sale along with the growing supply of new homes for sale will only aggravate the problem and carry out all real estate values ??down.
A recent survey showed that seven out of ten people believe that the housing bubble will burst before April 2007. This change in market psychology "the property must at all costs" for a healthy concern that real estate is overpriced is causing the end of the housing market boom.
Aftershock is a bubble bursting is huge and will affect the world economy tremendously. Billionaire investor George Soros said that in 2007, the U.S. is in recession and I share his opinion. I think we should have a recession, because as the housing bubble bursts, jobs are lost, the Americans are no longer able to withdraw money from their homes, and the whole economy will slow significantly, leading to a recession.
Finally, the three reasons the housing bubble is filled with high interest rates, buyers now have a price for the first out of the market and the psychology of some real estate markets are changing.
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