Real Estate Flipping

With the world still reeling from the recent financial crisis, many are looking to the route of the problem for signs of recovery and future security. Because it is well known that the main catalyst for the recent economic crisis was the sub-prime mortgage crisis, the U.S. housing market is the focus of much attention.

Because of this, the decline in house sales during July will be news that will not please many. With it having been believed that the economy was in recovery, it was hoped that home sales figures are stronger than they are now as a decline in home sales might suggest that the economy is not recovering after all.

Do the statistics paint the full picture though? One reason for the decline is that the first time home buyer tax credit period encouraged many home buyers to bring forward their home purchase from later in the year. This means that those who might have bought a home in July have already done so. Before the end of April, which is when the incentive ended, house prices were rising due to the increased sales that the first time home buyer tax credit period encouraged. Basically what goes up, must come down, and we could just be seeing the market correcting itself after artificially high figures earlier in the year.

With falling home prices, we could also just be in a period where potential buyers are postponing their decision to buy so that they can enter the market when house prices are lower. Considering house prices have remained more or less the same despite the recent crisis, it is only inevitable that they should drop a little and many prospective buyers will understand this.

One thing that economists might be more concerned about, however, is that the general public's sentiment towards home ownership appears to be changing since the crisis. Because so many individuals were left exposed to debt and bad credit ratings, many have questioned the value of home ownership and are considering alternatives such as renting. If this is the case then the housing market will need to adjust accordingly to fit in with a new trend as individual houses may not be in demand as they once were. People do still need to have somewhere to live however, so unless they decide to remain at home with their parents, accommodation will still be needed. Much of this accommodation might come in the form of apartments or town houses, although there is still likely to be a reasonable demand for rental houses.

Perhaps one of the most important factors influencing the market is that the requirements to qualify for a mortgage are now much stricter than they were before the crisis. This means that fewer people are able to purchase a home, or they have to purchase their home for less. This means that the housing market is likely to drop further as the supply and demand effect takes place.

It is difficult to be sure of how the market is actually poised because incentives such as the first time buyer tax credit incentive have thrown the market out of synchronization, making it difficult to judge the balance. Because of this we might have to wait until the next tax credit period before we can get a better picture of where the market actually stands.

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