WARNING: Cities with CRASHING Home Prices | Housing Bubbles

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WARNING: Cities with CRASHING Home Prices | Biggest Housing Bubbles

So, here’s how things are unfolding.

The American – and most of the rest of the world – economy is struggling big time at the moment.

These tight economic conditions are pushing the housing market into a tight corner, which could spell good news for a small number of home buyers but could be trouble for many other folks.

Banks are scared by all of the economic doom and gloom at the moment, meaning that if you’re thinking of asking one to help you out with a mortgage, they’re likely to be much stingier than normal at the moment. Understandably so.

First of all, the banks are expecting people to commit to intimidating mortgage rates at the moment.

Even with all of the financial hardship many Americans are experiencing at the moment, homebuyers are being asked to take on mortgage rates of around 7%, which would’ve sounded ridiculous just a few years ago.

Not only will you be expected to pay such a high interest rate on your loan, but you could also struggle big time to even get banks to accept your application in the first place.

With all the risk aversion that’s becoming commonplace among banks as a recession looms, they’re becoming more and more picky about whom to go into business with.

So even if you were confident of securing a mortgage a few years ago and being able to do so at a good rate, you might find banks respond very differently to you now.

So, what does this tough mortgage situation mean for home prices? Well, we’ve already seen prices start falling in many cities.

The Biggest price declines have come in California, with Oakland and San Jose home prices dropping by 16.4% and 14.5% respectively.

Heber Utah, Austin Texas and Coeur d’Alene Idaho are the 3 others rounding out the 5 places with the biggest housing decline over the past quarter.

But this drop is likely to just be the beginning of a pattern we’ll see continue for the next couple of years.

Housing markets don’t tend to crash suddenly in the same way that the stock market sometimes does.

People are far more attached to their homes than their stocks and are less likely to spot the data trends that show when a good time to sell is.

That’s why declines in housing prices tend to initially start slowly as people don’t react completely rationally to the economic situation.

We are still in this initial stage of slight denial with home prices not falling at the speed that the spikes in mortgage rates and drop in market prices suggest they should.

American homebuyers have a tendency to be particularly bullish, normally assuming that housing prices will continue to go up year after year.

To be fair to them, this is often the case, but it takes them a long time to readjust even when the market starts to give out different signals.

So, what does this resistance to the market’s downward push mean?

History shows that such situations quickly snowball and in this situation with a recession looming, things could start tumbling even more quickly than normal.

Eventually, the fall in prices will become impossible to ignore, forcing people to adjust to the market, which will plummet once the brakes are off.

This is being slightly postponed by the impressive unemployment rate that currently stands at around only 3.5%, which is slightly offsetting the high mortgage rates.

Simply put, when people are employed, they’re far more likely to seek out a mortgage or be able to pay off their current one.

As people lose their jobs and struggle to find new work, they become far less likely to be able to pay off their mortgages and are very unlikely to be looking at new home-buying opportunities.

Things eventually start to readjust though. Banks recalibrate in terms of crisis and will eventually be able to bring down mortgage rates as they see a path out of recession.

This is the same story that happened after the 2008 crash.

When the mortgage rates do start to drop alongside home prices, great buying opportunities come along. You’ll be paying less interest on a much cheaper home if you can wait things out for the right moment.