In the last few years there has been a fast paced real estate market. This rapid market has in part been due to low interest rates, loans with low down payments, easy qualifying mortgagesand an increase in the number of buyers.
The market is already seeing a return to a more balanced market. Annual sales saw a slight decrease and there has been an increase in the number of homes for sale.
The rapid market has had homeowners expecting their home to appreciate in record time and amounts. Similarly, investors have been entering the market at four times what they would normally.
Many have speculated that we are in a “housing bubble” and are waiting for the bubble to pop. Others suggest we are in a housing balloon that will not pop but rather develop a slow leak.
Most believe that no matter what kind of market we have we should see the market begin to level off as interest rates continue to rise. Consumer spending and not job and income growth has caused the economy to do so well, so it is important that there is a smooth landing.
If the market does crash, investors and homeowners could face a lot of trouble. They will have less equity. This means there will be less spending and borrowing but still a huge amount of debt.
The adjustable mortgage rates and easy loan qualifications that helped the market remain so strong could cause a lot of homeowners trouble in making their monthly payments.
Interest rates have seen an increase in the past few quarters and are likely to continue to increase causing monthly mortgage payments to increase.
Everyone is hoping for a smooth landing in the real estate market because a hard crash would decrease consumer spending and hurt businesses and economy as a whole.