Forces that affect Real Estate Prices

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The price of real estate is greatly influenced by the supply and demand of the market. In the 40’s and 50’s, a real estate buyer has to put up 20% of the selling price as down payment. This put him in a situation where he has a solid investment on the property; but caused him some personal sacrifices to raise the amount. This minimized his speculative moves on the property that stabilized real estate prices into its real values during those times.

But during the recent times, liberal credit has eased the manner of owning a property. With just 5% or no-down payment schemes, one could buy a house. This situation increased the demand of houses for sale that caused their price to spiral upward artificially. This is aggravated by the Sub-Prime housing loans given to unqualified borrowers. These easy loans were induced by the avalanche of excess funds, some coming from foreign sources. These also tempted many unqualified borrowers to speculate in buy and sell of houses, which further pushed the prices to an artificial record high.

These abnormal ways caused the real estate price bubble to burst, causing prices to settle at their true worth.  These occurred when due dates of these Sub-Prime loans came; and the speculators who have no funds to support their ventures defaulted on their amortizations. These caused world-wide economic crises, considering that some of the funds came from foreign sources.

Though the real estate prices all over the world were affected due to lower demand, and also, due to lack of funds as a result of the economic crises; the real estate prices bubble burst occurred most severely in USA; because it was here, where most of the speculative real estate ventures occurred. These caused the house prices to spiral down, even lower than their true value. Suddenly, there is an oversupply of houses for sale.

So,  this is the time for astute investors to buy houses, while prices are down at low artificial level.

Tampa4U Team | 813.671.6657 | Tampa Real Estate | Tampa MLS

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judyo

Well put. Unfortunately, I have to make the decision to sell my own house at the price I paid for it in 2003 (could be lower), after putting thousands upon thousands into it for upgrades and remodeling, or renting it out in the hopes it will appreciate a little down the road. However, by that time we might need to put a new roof on which will wipe out a small uptick in value.

On the other hand, we got a steal of a foreclosure that cost about the same as our current home but is much bigger, although we are putting thousands into it to bring it up to our standards (it will actually be nicer than our current house since we're doing it for us to stay here long-term).

Do we hold onto our current home for the long-term and rent it out and hope we don't lose down the road? Or do we cut our losses now and just sell it for whatever the market will bear?

Great time to buy if you can, tough time to sell.

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