The state of the economy proved difficult for many people over the last several years. Home owners were among those hit hardest because of the risks of losing their homes. Some found it necessary to downsize, but were unable to sell the houses they lived in to do so. Then, it began to turn around, at least where the home buyers were concerned and in some cases, a housing bubble occurred. According to a blog post found on Dean Graziosi’s website, a housing bubble occurs when “certain investments are bid up to prices that are far too high to be sustainable in the long run.” Now it is thought that another one may be on the way, and this is causing concern for many realtors and home buyers alike.
Home prices don’t necessarily work like those of other products. Typically, when a product is in demand, the price goes up as a result. People want or need it, and they are willing to pay those higher prices to get it. Real estate, on the other hand, can work differently. Here, when demand goes up, the prices may also rise, but also when demand isn’t met, the prices will rise. There are many reasons why this can occur. One example listed on Dean Graziosi’s site states, “if an area has no further land to build on, the prices of the current homes in that area will rise.”
Home prices will come down when demand decreases and supply increases. Here, there are more homes to sell than people wanting to buy them. People will be willing to lower the asking prices because they really need to sell their homes and there just aren’t very many takers at the moment.
The state of the economy can predict whether or not a housing bubble may be on the way. If the economy is bad, people are less likely to buy for fear they won’t be able to maintain monthly payments. The other side is that people won’t sell, predominantly because no one is buying. When things begin to level out, those who need to sell will often lower prices because they have no choice. This is great for the buyers who are then able to get their new homes at unbelievable prices.
Eventually, however, the situation will come around again where the demand will increase. Sellers won’t necessarily need to sell their homes for lower asking prices, and these prices may, once again be driven up.
So is another housing bubble on the way? While the answer to this question isn’t yet clear, it’s definitely a possibility. When it would occur isn’t known, and for now, buyers can still purchase homes at very reasonable prices. Keep up with Dean Graziosi’s blog to learn more about this and other topics.