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On The Mortgage Crisis and Upcoming Generations

Posted by  on Apr 16, 2009
 
If you do not follow the news then you are not aware of the sub prime mortgage fallout and the impending decline of the housing market. Buyers in the past 3-5 years have been given large loans with little hassle for the purchase of a home or property, often without much background check or sufficient credit report investigation. Because of a small decrease in the country’s overall economy in the past year or two, a large number of people have not been able to afford payments on their loans or sell the house at the price they bought it for in order to make good on the loan. The intense number of foreclosures has lead to an influx of houses flooding the market causing a sharp decline in overall value of land and house value across the country. This has added to even more economical trouble because people involved tin the housing industry, often receiving loans in the hopes of selling the house relatively fast and making a quick profit, are stuck with many houses they cannot afford that are worth substantially less than they paid. So the current market stands with a large number of cheap houses on the market with still nobody able to afford them because of the declining stability of our economy. The people that can afford them no longer see a profit in the area at the moment so have pulled their resources from the area which soon will most likely lead to the housing market hitting rock bottom within the next year or so.

If we look at how this decline will affect upcoming generations we shift first to the immediate generation at hand. The people who would normally be buying houses at the moment seem to be opting more for the renting option, not increasing the value of houses or property around but simply shifting the balance of money from those working class people to the landlords whom are usually wealthier and relatively unaffected by the market. Although at first this may seem like an economically negative idea eventually it will help to stabilize the economy. In around five years the market should rebound off of the impending recession and the landlords, along with other investors, will se the new opportunity to acquire lots of land at a comparatively low price to today’s markets. They will again begin investing in land and selling it as new up and coming people begin purchasing homes. The difference between the future and now are the much more strict lending rules and regulations being put into practice in light of the current sub prime lending practices and their results.

So overall what does this meant? Well first off, the housing market is declining and for the next four or five years there will be many houses on the market for a very good price. Secondly, the mortgage companies still around are lending out loans to people with solid credit and secure finances, and therefore generally will be good lending institutions to take out a loan with. Thirdly, the market is not decimated, although it is going to recess for a period of time. Our economy as well as the housing market will definitely recover and house prices will rise again. Overall although this may not be the best time to purchase a house and take out a home loan because of the difficulty of obtaining a loan at the moment, soon enough everything will go back to normal. The sub prime crisis has not reshaped the trend of the housing market; it simply set it back about five years as well as strengthened the overall legitimacy of lending practices to ensure stable growth in the future.

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