The property rates are up and seem to be rising unabated. One might wonder if we are headed for another collapse. However, the data reveal that with tough lending norms, this stands a little chance and the current price escalations are more a result of demand and supply dynamics.
People are still living with the memories of the sub-prime crisis. However, real estate markets have changed rapidly since the bubble burst in the 2008 and all those who are out making mortgage buying decisions in US can feel the heat. The situation is such that one might be forced to think if we are headed for another fall in the real estate market in the US.
Let us look at some of the recent experience of the people out there in the market looking for a mortgage.
US Mortgage market: The market in the current situation looks to highly fragmented. Lower inventory and high demand have pushed the prices to the levels where only the highly affluent and people who are cash rich can afford to purchase property in New York City. If you already hold a property even then there is no guarantee that you will able to get a property for yourself. This is so because there are all cash buyers who would always win over the bidding process. First time buyers have no scope either and have to move to other areas where they can find some affordable property. In fact a lot of such buyers are moving to places away from the cities but the situation is no different anywhere else too.
Reasons behind this splurge in the property prices
In Crown Heights, where the median income is in the range of $51,000 one cannot afford to buy houses with the median price for a two-bed house being listed at a whopping $4,25,000. Well these prices correspond to the demand which is often driven by higher net worth Americans and also a huge demand from the people living in Europe, Chine and Brazil.
The situation in New York is really tough. Recently there was news of the sale of a two-bed apartment in West 100s. The apartment was a simple one and required some work in terms of renovation also. The asking price of the apartment before the bidding was $1.2 million. However, the apartment still attracted many bidders and was finally sold at the price, which was $1, 50,000 higher than the asking price. So this confirms that even if you are having enough money you will get what you desire because there are others will to pay even higher than the asking price.
How about the other cities
Phoenix, LA, Miami is still in the process of recovering from the shock they witnessed in 2007 but the city of New York seems to have been running towards another collapse. This may not be true but looking at the kind of news one receives from the deals that are taking place one has to believe the same. The property rates are well supported by the scarce available properties in the area. The city’s boundaries have far extended to the areas like Bedford, Crown heights and others which have also seen a steep rise in the property rates.
Facts and Figures:
As per the statistics based on Streeteasy.com, with only 3,066 properties entering into a contract, the area has witnessed a jump of 15% in the property rates but the number of properties saw a steep jump after the 2008 burst.
So is the situation really grave? Are we headed for another round of the real estate debacle in the US? Well actually it’s not. Low interest rates, scarcity of inventory and the desperate buyers all put together has led to a huge demand which is pushing the prices further upwards.
Mortgage loans in the current scenario
Lenders have become a lot cautious after the debacle. They are not after quick profits and hence the speculators and those with bad credit are put away. Lenders are more selective in making approvals. Unlike 2007 where the inventory was huge, the situation is really different now. With selective properties in supply, the property rates are way beyond the capacity of the normal buyers and only those with cash reserves can afford it.