The Home Building Decline is Continuing
Home building decline continues because of 2 things. One, it is hard to borrow money right now since we are experiencing a financial crisis. Two, what a lot of people are earning right now is not enough for them to buy a new home.
You might be thinking about if then bank is able to give you a loan? Though this can happen, it is still not a good idea because mortgages have been quite high in the past few years. In fact this is one of the reasons why this country in such a financial mess.
A lot of people borrow money and in the end could not pay the interest. Because of that, there have been massive foreclosures and the government has stepped in to try and solve the problem with a $700 billion bailout plan.
The bailout plan is designed to overpay banks for bad mortgages but will this work? Some analysts say no because the rollercoaster ride seen on Wall Street has nothing to do with the housing prices. In fact some politicians who were not in favor of the bailout plan argue that the government should never have stepped in the first place because this is a free market economy.
Because this was done, you are forcing the American tax payer, the honest and good ones to give their hard earned money to people and companies who made this problem happen in the first place.
What makes matter worse is that banks who happily loaned money to homeowners sold this to companies like Fannie Mae or to buyers of mortgage backed bonds. As a result, the value of most homes is now falling so you will have a hard time making a profit if you decide to sell your home.
The sad reality out of all of this is that this is not expected to stabilize any time soon. The value of most homes will continue to drop for 5 years or even more which bring us back to the conclusion that it is better to rent than to build a home.
To cite one example yearly rents in for homes especially around the coastal areas are 3% less than their actual purchase price. The mortgage rates are much higher so it is really not worth to buy or even build a house.
But this may not be the same in other states since some property values and lots have already fallen into line with what people are actually earning so you should check whether or you can afford to build a house given your location.
We mentioned earlier that the second reason for the decline in home building is that people are not earning enough to buy a home. This is true for new families especially those who have children because it’s hard to do both when you already have children.
So what should people do? The right thing to do as home building decline continues is simply to ride it out and then see what happens in the next 3 to 5 years. Yes that means still renting that place you have been living in for a few more years but look at the bright side, you are not one of hundreds of Americans who are forced to foreclose their homes and no longer have a place to stay.
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