Real Estate Market: How It is Affected by The Economy- By: Vicki Hat
In 2009, the economy has been showing improvements. The gross domestic product has shown a rising trend, especially on the latter half of the year. But even if the economy is exhibiting some life, it is still weak. Now, there lies a question. With the current economy, how will it affect the current real estate market?
2010 is the year of the tiger. The economy, on the early part of the year, has been showing plenty of signs for its tiger improvement. However, the real estate market is still slowing. Although in 2009, the market sales have showed an increase but all seems to be temporary. For one, in 2008 and 2009, the government had a stimulus package to boost housing sales. They did it by providing tax credits for first time home buyers. They even extended it to this year and gave better provisions by including repeat buyers to avail of the tax credits. Yes, this has helped a lot to spark some spending on housing sector. However, if you look at it, the programs are nearing its end. What happens if the stimulus package would use up its last cent? Will the real estate market sustain its sales?
Probably, the market cannot do it on its own. There are still other issues that the government has to face in order to improve the real estate market. Number one issue is employment. Even if the government has released trillions of funds to buy back treasury bills just to lower the mortgage rates, many people could not afford the cheap rates not until they find a stable job. And even this kind of program seems a working solution, if prices still continue to inflate and the unemployment issue has not yet been taken care of, people would still withhold spending. This would even worse when all the perks for home buying are exhausted.
Another issue is the inflation of interest rates. Last year, the rates hit rock bottom (as they say the lowest historically). The control of the interest rates has been brought by the government's stimulus package. Because of buying back treasury bills, the interest rates have become lower. However, the rates may start to bounce back when the funds for this program will be used up by the first quarter of this year.
The increasing gross domestic product may be a sign of economic recovery. But this does not assure growth in the real estate market. Unless the government would think of another program or tactics to keep people buying homes, then there could be a possible rising trend in sales.
The rising trends are evidence of baby steps to recovery. It occurrence can still be the hope for bringing back the market to its path of recovery. There is a small increase in home prices, as well as sales. But all of this would not be enough to sustain sales in real estate market for the following years nor would it guarantee a speedy come back for the sector.
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