Ok, let me introduce this topic- the "housing bubble". A "bubble" market occurs when prices for a given good- houses, stocks, tulips- increase to unsustainable or even absurd levels. As we well know, housing price shock is an art form where we live. Since housing construction accounts for 5% of GDP, we need to pay attention to this issue. Watch this Newshour essay, and tell me why a housing bubble might not be like other kinds of bubbles.
6 comments:
With prices in the real estate market increasing so rapidly for such a long time, something's gotta give. People who had the fortune of purchasing their houses before their value increased so dramatically have become very self-assured in their economic security. But many people have forgotten that they're will be a breaking point when people aren't going to be willing to purchase a 1-bedroom house on a .25 acre plot for $550,000(it happened down the road from me). Although a price decrease in the real estate market will be devastating for those homeowners and contruction workers and so on, this change will welcome people with lower incomes to be able to buy houses that are more desirable than what used to be offered to them.
ps- Anne Taylor Fleming's picture is mad cute ;)
To think that the absurd housing prices in East Hampton could all of a sudden depreciate in a bubble "burst" seems unprobable. I think that prices will not drop because the supply is limited since there is only so much prime eastern long island real esated. With supply low and unavailable people demanding property will have to pay more. So to think someone would offer their house for less in such a small market seems unreal. But then again crazier things have happened. If it does happen a lot of people who feel economically safe right now will have problems.
Unlike other bubbles, people can benefit from the bursting of the house market bubble. People who were not able to afford houses before can now buy them since prices are lower. However, this will have negative affects on some people, such as construction workers and landscapers. This is because people are no longer willing to pay $2 million for a 1-story house with 2 bedrooms, like one on my road. Ironically, the house will not sell for $1 million now, even after it was renovated.
People with lower incomes can benefit from the bursting of the house market bubble because it allows them to purchase houses at a more reasonable price. Although consturction workers and homeowners will suffer a bit. House in the Hamptons will still stay relatively high because there is an limited amount of beachfront property on Eastern Long Island.
it seems like the raising of real estate has been artifically inflated and it has risen so much so rapidly that some kind of decrease in price is going to happen some time soon.if the burst happends people who rely on their property as a main asset will be uneasy and who knows what other parts of the economy will be affected by the people who lose a large asset. on the other side the people with low incomes will benefit from this burst.
People who can not afford to buy a house at the rate houses are at now would benefit from the bursting of the house markey bubble. Although it seems unreal for that to happpen in East Hampton it would be benefitial to people in other places. People who build houses and real estate companies and many other people attached to the selling of the house will be negatively effected.
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