In recent years, debt for the average American household has skyrocketed. This brewing economic storm has caused many sorts of problems for various industries, especially the homeowners who are selling and the would be buyers to be wary of purchasing a home. High-debt and a sluggish market are the perfect economic storm forces which have caused the real estate and property market to stall. This is the tipping point which is technically called the lock-in effect by experts.
What is Happening in The Current Property Market?
A perfect economic storm of various economic forces and factors have caused homeowners to not want to sell any property and buyers unable to purchase any homes for themselves. This is definitely causing a slow-down in homeowner and buyer market. A lot of homeowners are unwilling to sell, and many buyers cannot afford to purchase any real estate. This economic storm in the housing market has also caused the housing prices to soar, despite the relatively slow down and lock in effect. The various forces at work in this economic storm will be listed down below. If you want to get to the bottom of the cause of this economic storm, then keep on reading.
Higher Household Debt
A lot of people are in more debt nowadays. Credit card debts, student loan debts, are just some of the factors which are part of this perfect economic storm. This has caused prospective and young home buyers to stall in buying their first home because they are in a lot of debt.
Homeowners Unwilling to Sell
Many homeowners are also seeing this economic storm of high debt, and it has caused them to stall in selling their homes. If more homeowners are unwilling to sell their real estate, then that will thin out the market of available properties, this can drive up prices of the already expensive real estate. This causes more buyers to not even be able to afford a new home.
Not Enough Starter Homes
Another force at work in this perfect economic storm is that there is an imbalance in the inventory of homes available. There are a lot of luxury homes on the market, but not a lot of starter homes. Luxury homes tend to be very expensive, and not a lot of first-time home buyers are able to afford them. So this huge imbalance in inventory has sidelined many home buyers and also caused homeowners to not want to sell their starter homes as well.
More and more people are getting locked out of the housing market, due to the perfect economic storm that has been raging for the past few years. There is currently no end in sight to this economic storm I the real estate and housing market. Young people would rather rent than buy a home, due to the economic storm that is happening in the housing market. This economic storm is also expected to cause interest rates to go up even further in the next few years. This huge increase in interest rates may cause young home buyers to not even want to buy any real estate. This may not be a bad thing, since the convergence of these economic forces may cause more people to rent. And people who rent are able to be more mobile.