Economists are watching the current real estate market and all wondering the same thing: are we about to see another housing bubble?
According to some, the answer is yes. As we enter into a pandemic-fueled recession, it is entirely likely that the housing market is going to get as ugly now as it was in 2008.
How do housing bubbles occur and what factors lead to a real estate crash? What should you do with your property if you’re trying to sell in an unstable market?
Read on to learn everything you need to know about housing bubbles.
What Is a Housing Bubble?
In the simplest terms, a housing bubble occurs when the demand for real estate exceeds the supply. In other words, you’re looking at more people who want to purchase a home than there are homes for sale. As a result, housing prices start to skyrocket, which further fuels the desire to buy and flip properties.
Housing bubbles often accompany wider economic crises. For example, in the mid-2000s, we saw a massive drop in the stock market, contributing to a widespread recession.
In an effort to bring some stability to the economy, the US government made several moves to encourage the purchase of real estate. One of these moves was to provide mortgages with extremely low interest rates and minimal loose credit underwriting standards. All over the nation, people started purchasing homes that were normally outside of their reach, many with the hope to resell at an even higher rate.
What Causes the Housing Bubble to Burst?
This bubble can’t last forever. At some point, the ratio of supply to demand will reverse, and you’ll see far more houses on the market than people are willing to buy. In a perfect storm, this reversal lines up with a restabilization of the economy.
Why does a restabilized economy make things worse? In the case of the mid-2000s housing bubble, the stock market started to level out again and both the government and banks became less concerned with lower-income families. Interest rates on mortgages went up and the value of all those properties went down as more and more people jumped from the real estate ship.
Ultimately, when a housing bubble bursts, it becomes incredibly difficult to sell a house, especially for a decent price. So, what should you do?
How Do You Sell Your House in a Bad Housing Market?
If you need to sell your house in a bad housing market, you have a few options. You can hire an agent, lower your asking price, and sit it out. Alternatively, you can look for companies who say those five magic words: we buy houses for cash.
In the end, selling your house for cash to a business that doesn’t take a commission is probably your best bet when you’re staring at the tail end of a housing bubble!
Beware the Burst
Whether you’re in the real estate business or you’re an individual homeowner looking to sell, make sure you understand how the housing bubble is. If you still need to sell, do your best to do so before the bubble bursts.
No matter your line of professional work, organization is important. Take a look at our templates that work for all business owners and get more organized!
