Response to "Is the Real Estate Market Really Recovering?"

M. Porter

Wednesday June 26, 2013

Macro Econ 122

Professor Kassens

Blog Critique: Is the Real Estate Market Really Recovering?

            After reading my classmates’ blog, “Is the Real Estate Market Really Recovering?” there are several things that I know now about the real estate market, and where it stands now in terms of our economy. I agree with the author, the housing and construction markets have not been the same since the infamous collapse of 2008. However, this being said, it is obvious that our economy has made enormous steps in terms of recovering recently. One point my classmate, Griffin, makes the point in his blog is that he believes two main reasons of the housing market is successfully recovering because of one, interest rates and mortgage rates are both currently very low, making the thought of buying a new home more alluring. In addition to these low rates, the average household income of families has increased, leaving them with more disposable income, making buying a new house even easier.

            Another interesting fact I learned is that banks foreclosing on homes while people are living in them is an extremely costly operation for them. It’s been documented that it can take as long as two and a half years, and cost as much fifty cents to every dollar for the bank to foreclose a home on someone while they’re living in it. As a result, banks have increased their short sales, and issued more loans to homeowners, making it easier and more affordable for them.  This aspect of the article was extremely interesting to me.  Personally, I think this is both a blessing and a curse that banks are doing this. I think that it is great that banks want to make issuing loans easier on those applying for them, especially when the average price of a home has increased 10% annually. However, I feel like this could cause people to over-extend themselves, and indulge in something that they can’t entirely afford. Additionally, with these rock bottom interest rates, it will take even longer for the banks to be paid back and they won’t be paid back as much as they would in the past years.  Another part of the blog I found particularly interesting is how the marketing is doing exceptionally well in both California and Arizona. Due to the strong demand, there have been more homes constructed and sold then anywhere else in the United States. We can only hope that whatever the reason behind this may be, will make its way east across the nation and the other states will reap the benefits these two states are currently enjoying.

            I am in full agreement that the housing market is well on its way on making a full recovery. However, I do not believe that it is entirely back to what it once was. The construction business used to be an extremely enticing profession, allowing those working in the business to earn more then an honest living. I know several people who owned and operated their own housing businesses who were absolutely devastated by the collapse. Seeing first hand what the collapse did to the economy only a few years ago, I truly hope that we will be able to take actions to make sure this does not happen again.