Ever since the great housing bubble burst in 2008 people have been wearily doubtful about how long this market recovery will last.
Others, especially those who were hurt most by the rapid fall in home prices have been downright skeptical.
It has long been said in the US that what starts in California eventually spreads to the rest of the country.
Well, California real estate has been on fire.
Nocal or northern California has seen prices spike sharply due to the bay area and Socal or southern California continues to ride the wave of LA.
The pricing trend has even made it to the east coast where home prices have increased so quickly in Virginia due to the defense industry that this may be the hottest market in the US.
With so many markets climbing so quickly many observers are predicting another crash and see the recent recovery like a glass jaw just waiting to be broken by the slightest correction in the market.
Here’s why the “nay sayers” are so pessimistic about the housing recovery:
#1 – PAPER CHAMP
The Federal Reserves quantitative easing program of buying “mortgage backed securities” has directly impacted the housing market. It is basically understood that whenever the FED stops buying these securities the housing industry will once again slow down if not completely crash again.
#2 – JOBS
The driving factor for the 2008 market crash was the fact that incomes were not keeping pace with the prices of homes.
The same appears to be happening again.
Participation in the workplace and incomes has declined over the past few years while property values are climbing higher and higher coast to coast.
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#3 – INTEREST RATES
It is extremely difficult to sell the idea of a healthy market and economy when the interest rates paid to savings accounts are so low.
I’ve never seen banks advertising certificates of deposit that pay less than 1% per year.
Add to this the fact that if interest rates on mortgages increase this will definitely impact housing in a negative way as this will directly increase the cost of purchasing a home with financing.
Now it’s over to you.
How long do you think this current market recovery will last?