The Current State of the Housing market in the United states - Research Paper Example

Current of Housing Market in US United s has witnessed numerous periods of economic depressions and boom ever since it came into existence. At this moment too, US is passing through one of the most difficult times economically. Fiscal deficit, high unemployment and falling exports have hit many of its sectors badly. The housing sector too has been severely affected by the 2008 economic crises. Prior to the 2008 economic crises, the housing sector was witnessing one of the largest economic booms in the history of the country. The demand for houses went over the roof and as a result people started to indulge in speculation and the boom eventually turned into a massive housing bubble. (Bardhan, Edelstein and Kroll, 24) The sector is still in a bad shape. Number of people defaulting on their mortgages is still extremely high and the total worth of the houses which has been kept as collateral is still far below the total loan amount borrowed by the house owner. High unemployment levels and excess inventory has also made matters worse for the overall sector. (NAHB) Though the delinquency level is extremely high, the percentage of people who defaulting on their loan installments have reduced to the lowest levels since the beginning of the crises in 2008. The decline in percentage means that more and more people are paying their installments on time which is a beneficial not only for the banks but for the overall housing sector. (Delinquency Decrease) The decline in the default rate is primarily due to a modest rise in employment numbers and sense of optimism among the business community and common people. Although the delinquency numbers are falling yet the price of the houses are still under pressure due to the high level of inventory and large number of bank owned foreclosures. (Jobs Housing) Though the housing sector is still shaky, the good news is that it is showing signs of recovery. As per the official figures the construction activity too has shown signs of improvement. Rise in construction activity is a good indicator and as it generates employment and business to construction related industries and small businesses. (NAHB Housing) Construction activities slowed down considerably after the crises which made a lot of people unemployed. The halt in construction was due to the weak demand and high supply. High inventory and bank owned foreclosures kept the construction activity low which inversely affected the worth of the houses. Low rental and speculation also contributed immensely to the housing crises. Homeowners who have high debts as compared to the worth of their house are the real danger to the fragile recovery. Almost one third Americans owe more than what the real worth of their house is. Many house owners prefer to let go off their house instead of paying costly loans. There are many people who have purchased houses purely for business reasons and have no intentions to live in those houses. Many economists believe that the level of debt is the main issue which could hamper the growth momentum. The government must put in more efforts to stimulate housing demand by implementing the right policies. Many economists feel that people whose housing debt is more than the worth of their collateral should be given concessions if they have a good credit history. After all these years of housing crises, the good news is that fewer people are now putting their houses on sale and the percentage fall in prices is reducing month on month. Fewer houses on sale would definitely reduce the inventory and would ultimately stall the price fall. The total fall in house inventory in the month of October fell by 2.2% as compared to the total inventory in the month of September according to the report released by the national association of Realtors. The prices of houses to rose up marginally by 2.65% in the same period. (October-Existing) With reducing inventory and price stabilization the chances of recovery in the housing market becomes quite certain. The government too should also try to bring in more economic measures to bring in stability and employment. The signs of growth are clearly visible in Florida which suffered the most in the 2008 housing crises. Florida has seen rise in home prices and fall in inventory, which clearly indicates revival of the housing market in the state. The overall trend in the housing market is looking better than couple of years ago. The government here must put all their efforts to provide more employment and incentives to small business which is crucial for sustaining the fragile housing recovery. Banks and lenders too should make efforts to ease their credit policy and give incentives to borrowers who are paying back the loan properly. Proper credit and better economic fundamentals would surely push the market. Many potential buyers were forced to cancel or post phoned their purchase due to the rejection of their mortgage applications. Sub prime crises and high delinquency have forced the banks to adopt a strict credit policy. (NAHB: Builder) Efforts should be made by banks and the government to adopt a much flexible credit policy which would help small investors to purchase houses and reduce the massive inventory which is affecting the overall housing market. Work Cited Bardhan, Ashok, Robert Edelstein, and Cynthia kroll. Global Housing Market: Crises, Policies, and Institutes. Hoboken, New Jersey: John Wiley & Sons, Inc, 2011. Print. "Delinquencies Decrease, Foreclosures Rise in Latest MBA Mortgage Delinquency Survey." Mortgage Bankers Association, 17 Nov. 2011. Web. 22 Nov. 2011. . Mutikani, Lucia. "Jobs, housing data bolster U.S. growth outlook." Reuters, 17 Nov. 2011. Web. 22 Nov. 2011. . "NAHB: Builder Confidence Rises Three Points in November." NAHB. National Association of Home Builders, 16 Nov. 2011. Web. 22 Nov. 2011. . "NAHB: Housing Long Road Back to Normal." NAHB. National Association of Home Builders, 31 Oct. 2011. Web. 23 Nov. 2011. . "October Existing- Home Sale Rise." National Association of Realtors, 21 Nov. 2011. Web. 23 Nov. 2011. . Schwartz, Herman. Sub Prime Nation: American Power, Global Capital and the Housing Bubble. New York: Cornell University Press, 2009. Print. Read More