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Do you know why the housing market is cooling off so fast?

I was just reading a news story on Yahoo! News about the housing market cooling off, and this quote sums it up pretty well: “sharpest deceleration in house price appreciation since the beginning of the OFHEO’s index in 1975”.

Gosh, reading that, I’m very glad I didn’t go buying a house last summer, as surely this means that the market is going south in a hurry. What I don’t understand though is why it’s decelarating so fast - is it that too many people bought houses that really couldn’t afford them with those ARM mortagages and the fabled “1% APR” teaser rates?

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Answer #1

I would expect a drop in the sales to follow a quick period of buying “reflux”. Those who wanted to buy but are getting cold-feet because of this media-hyped cooling of the market. But, buyer beware there are quite a few sellers out there that are going to try to get the inflated prices from last year during the next flux of buying. Don’t mistake the next wave of property price soaring as a time to buy. Bide your time till the Fed has solidified its position. You could very well see another drop and much larger than the current one which will drive prices down. Enough of this will stop the volume of purchasing, however it will open up opportunities for those who know when to take advantage.

Yes the mortgage incentives are dropping and the banks are much richer without the need to pump the industry. What we are seeing now I believe are balloon mortgages coming around to a do or die. Look for some forclosures over the next few years.

I will see if any of my friends know more about the real estate industry and have them post some questions…..

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