Real Estate Market Is In a Fix

August 22, 2007

If you have more product than demand, the price goes down.  This is basic economics, and most people learn it in high school (if not before).  The housing market has been defying these laws for years, and the results could be starting to show themselves in the present market.

We live in a rural community with a fairly small population.  Every time a large track of land is sold, a subdivision soon pops up on it.  The population hasn’t grown, but the number of homes available has skyrocketed.  More than once I have pondered how this is possible.

From everything I have read about the real-estate market over the last several years, it was MADE possible by lenders desperate to make loans.  After the legitimate market was dried up, lenders began extending credit to consumers that would not have qualified before.

Not only that, but the size of the loans continued to grow because the payments were spread out over more years (it’s possible to get a fifty year mortgage and a sixty year mortgage is in the near future).  Even with all the lenders adjustments, borrowers’ eyes were bigger than their pocket book and payments were still just barely manageable. 

Now the rising interest rates are pushing payments beyond the means of the borrowers.  Lenders have to foreclose, and worse, they are getting stuck with the properties because of a saturated market.

There is not much sympathy in me for this real estate market or those caught in the turmoil.  The lenders and the borrowers have equally made a mess of things. 

Posted in Home Values, Financing, The Market