3 Of The Top 9 Reasons That The Real Estate Bubble Is Bursting

3 Of The Top 9 Reasons That The Real Estate Bubble Is Bursting



3 of​ the​ top 9 reasons that the​ real estate bubble is​ bursting
If you own real estate or​ are thinking of​ buying real estate then you better pay attention, because this could be the​ most important message you receive this year regarding real estate and​ ​ your financial future. ​

The last five years have seen explosive growth in the​ real estate market and​ ​ as​ a​ result many people believe that real estate is​ the​ safest investment you can make. ​
Well, that is​ no longer true. ​
Rapidly increasing real estate prices have caused the​ real estate market to be at ​ price levels never before seen in history when adjusted for​ inflation! the​ growing number of​ people concerned about the​ real estate bubble means there are less available real estate buyers. ​
Fewer buyers mean that prices are coming down. ​

On May 4, 2018, Federal Reserve Board Governor Susan Blies stated that Housing has really sort of​ peaked. ​
This follows on the​ heels of​ the​ new Fed Chairman Ben Bernanke saying that he was concerned that the​ softening of​ the​ real estate market would hurt the​ economy. ​
And former Fed Chairman Alan Greenspan previously described the​ real estate market as​ frothy. ​
All of​ these top financial experts agree that there is​ already a​ viable downturn in the​ market, so clearly there is​ a​ need to know the​ reasons behind this change.
3 of​ the​ top 9 reasons that the​ real estate bubble will burst include
1. ​
Interest rates are rising foreclosures are up 72%!
2. ​
First time homebuyers are priced out of​ the​ market the​ real estate market is​ a​ pyramid and​ ​ the​ base is​ crumbling
3. ​
The psychology of​ the​ market has changed so that now people are afraid of​ the​ bubble bursting the​ mania over real estate is​ over!
The first reason that the​ real estate bubble is​ bursting is​ rising interest rates. ​
Under Alan Greenspan, interest rates were at ​ historic lows from June 2003 to June 2004. ​
These low interest rates allowed people to buy homes that were more expensive then what they could normally afford but at ​ the​ same monthly cost, essentially creating free money. ​
However, the​ time of​ low interest rates has ended as​ interest rates have been rising and​ ​ will continue to rise further. ​
Interest rates must rise to combat inflation, partly due to high gasoline and​ ​ food costs. ​
Higher interest rates make owning a​ home more expensive, thus driving existing home values down.
Higher interest rates are also affecting people who bought adjustable mortgages ARMs. ​
Adjustable mortgages have very low interest rates and​ ​ low monthly payments for​ the​ first two to three years but afterwards the​ low interest rate disappears and​ ​ the​ monthly mortgage payment jumps dramatically. ​
as​ a​ result of​ adjustable mortgage rate resets, home foreclosures for​ the​ 1st quarter of​ 2018 are up 72% over the​ 1st quarter of​ 2018. ​

The foreclosure situation will only worsen as​ interest rates continue to rise and​ ​ more adjustable mortgage payments are adjusted to a​ higher interest rate and​ ​ higher mortgage payment. ​
Moodys stated that 25% of​ all outstanding mortgages are coming up for​ interest rate resets during 2018 and​ ​ 2018. ​
That is​ $2 trillion of​ U.S. ​
mortgage debt! When the​ payments increase, it​ will be quite a​ hit to the​ pocketbook. ​
a​ study done by one of​ the​ countrys largest title insurers concluded that 1.4 million households will face a​ payment jump of​ 50% or​ more once the​ introductory payment period is​ over.
The second reason that the​ real estate bubble is​ bursting is​ that new homebuyers are no longer able to buy homes due to high prices and​ ​ higher interest rates. ​
The real estate market is​ basically a​ pyramid scheme and​ ​ as​ long as​ the​ number of​ buyers is​ growing everything is​ fine. ​
as​ homes are bought by first time home buyers at ​ the​ bottom of​ the​ pyramid, the​ new money for​ that $100,000.00 home goes all the​ way up the​ pyramid to the​ seller and​ ​ buyer of​ a​ $1,000,000.00 home as​ people sell one home and​ ​ buy a​ more expensive home. ​
This doubleedged sword of​ high real estate prices and​ ​ higher interest rates has priced many new buyers out of​ the​ market, and​ ​ now we are starting to feel the​ effects on the​ overall real estate market. ​
Sales are slowing and​ ​ inventories of​ homes available for​ sale are rising quickly. ​
The latest report on the​ housing market showed new home sales fell 10.5% for​ February 2018. ​
This is​ the​ largest onemonth drop in nine years.
The third reason that the​ real estate bubble is​ bursting is​ that the​ psychology of​ the​ real estate market has changed. ​
For the​ last five years the​ real estate market has risen dramatically and​ ​ if​ ​ you bought real estate you more than likely made money. ​
This positive return for​ so many investors fueled the​ market higher as​ more people saw this and​ ​ decided to also invest in real estate before they missed out.
The psychology of​ any bubble market, whether we are talking about the​ stock market or​ the​ real estate market is​ known as​ herd mentality, where everyone follows the​ herd. ​
This herd mentality is​ at ​ the​ heart of​ any bubble and​ ​ it​ has happened numerous times in the​ past including during the​ US stock market bubble of​ the​ late 1990s, the​ Japanese real estate bubble of​ the​ 1980s, and​ ​ even as​ far back as​ the​ US railroad bubble of​ the​ 1870s. ​
The herd mentality had completely taken over the​ real estate market until recently.
The bubble continues to rise as​ long as​ there is​ a​ greater fool to buy at ​ a​ higher price. ​
as​ there are less and​ ​ less greater fools available or​ willing to buy homes, the​ mania disappears. ​
When the​ hysteria passes, the​ excessive inventory that was built during the​ boom time causes prices to plummet. ​
This is​ true for​ all three of​ the​ historical bubbles mentioned above and​ ​ many other historical examples. ​
Also of​ importance to note is​ that when all three of​ these historical bubbles burst the​ US was thrown into recession.
With the​ changing in mindset related to the​ real estate market, investors and​ ​ speculators are getting scared that they will be left holding real estate that will lose money. ​
as​ a​ result, not only are they buying less real estate, but they are simultaneously selling their investment properties as​ well. ​
This is​ producing huge numbers of​ homes available for​ sale on the​ market at ​ the​ same time that record new home construction floods the​ market. ​
These two increasing supply forces, the​ increasing supply of​ existing homes for​ sale coupled with the​ increasing supply of​ new homes for​ sale will further exacerbate the​ problem and​ ​ drive all real estate values down.
A recent survey showed that 7 out of​ 10 people think the​ real estate bubble will burst before April 2018. ​
This change in the​ market psychology from must own real estate at ​ any cost to a​ healthy concern that real estate is​ overpriced is​ causing the​ end of​ the​ real estate market boom. ​

The aftershock of​ the​ bubble bursting will be enormous and​ ​ it​ will affect the​ global economy tremendously. ​
Billionaire investor George Soros has said that in 2018 the​ US will be in recession and​ ​ I ​ agree with him. ​
I ​ think we will be in a​ recession because as​ the​ real estate bubble bursts, jobs will be lost, Americans will no longer be able to cash out money from their homes, and​ ​ the​ entire economy will slow down dramatically thus leading to recession.
In conclusion, the​ three reasons the​ real estate bubble is​ bursting are higher interest rates; firsttime buyers being priced out of​ the​ market; and​ ​ the​ psychology about the​ real estate market is​ changing. ​
The recently published eBook How To Prosper In the​ Changing Real Estate Market. ​
Protect Yourself From the​ Bubble Now! discusses these items in more detail. ​
For more information visit www.MyRealEstateBubble.com
# # #




You Might Also Like:




No comments:

Powered by Blogger.