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The Effects of the Bursting Housing Bubble

by Hasan

The housing bubble is old news – very old. For years the Fed kept interest rates low which helped fuel the biggest housing market America had seen in years. But those good times are evaporating and even dramatic price cuts can’t keep the housing market alive.

A Bad Month
October was a bad month in the housing market. September and August were even worse. The holiday season is great for most retailers, but new homes sales have always been a bit sluggish throughout December and possibly even November.

The most interesting aspect of the poor sales in October was that the median price for a new home actually dropped 13% during the month. This is the largest pricing drop in 37 years. But even that dramatic cut wasn’t enough to get sales up to the forecasted levels. This is just one more blow in an already dismal report for the housing market.

A Buyer’s Market
It is most definitely a buyer’s market in most areas of the county. New home buyers are finding terrific deals. Builders first attempted to lure buyers with extra features on homes. Then they offered to pay a portion of closing costs or to give buyers a gift card for furniture. Now, those soft measures aren’t working anymore and builders have taken a final step – they are slashing prices.

This is terrific if you’re looking to buy your first home. There are plenty of homes on the market and you can take your time finding the one that is right for you. When you do find the home you want, feel free to negotiate the price – the builder wants the house sold at this point, even if they make far less profit than they originally anticipated.

Sellers Beware
If you’re trying to sell a home, however, the market just got that much less attractive. New homes in your area, or just outside of your area, are looking great to buyers. They may even be looking great to you. There are deals everywhere and many homeowners are starting to think that this is the perfect time to upgrade.

Why stay in a small house, when you can now buy a larger one for the same price? Many homeowners are being drawn with the great bargains, but are still struggling to close the deal. The problem is not with finding the new home – it’s getting out of the old one.

New homes are everywhere. It takes a very special existing home to be more attractive than a new one. The sellers who are feeling this most are those who are trying to sell in a recently developed area. Those in areas that are built out or highly desirable real estate are feeling less of a pinch although they may not be able to earn as much as they would have a year ago.

But regardless, the market is slowing down. Sellers are starting to feel the crunch as poignantly as the builders of new homes, but buyers are having a field day. It’s definitely a great time to just be entering the housing market.

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