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Why Is Housing Hurting/

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Why is Housing Hurting?

By: Andres Salazar

November 26, 2011

Instructor: Ana Gonzalez

Course: Microeconomics

For the first time in nearly three years, repeat buyers and investors have overtaken first-time buyers as sales leaders once again in the nation's housing market. The sellers' markets, home sells quickly and sellers have a lot of pricing power. As a result, prices rise more rapidly than at other times. During buyers' markets, homes may sit on the market for a while before selling, so sellers become more flexible and may even drop their prices. The market is determined by supply and demand. Some buyers and sellers hope to time their purchase to take advantage of market cycles. If buyers aren’t qualified, supply won’t be met and demand will be weaker. Without buyers supply means very little. Demand is a strong determinant of real estate pricing as well, and changes just as supply does. However, the market is not experiencing the traditional trade-up cycle because first time buyers are being sucked out of the bottom of the market by cheap vacant bank foreclosures. Every time a first time buyer buys a vacant home from a bank, three homeowners remain sitting on the market without a buyer. As the inventory piles up, prices come down. As prices come down, foreclosures rise. As foreclosure rise, first time buyers buy from banks. Somebody needs to focus on this dynamic soon, it’s been six years since the boomers first turned 60 and it’s no coincidence that there’s more inventory than can be absorbed. Real estate is highly important to the economy of the United States, as it represents nearly two-thirds of the nations’ net worth, accounts for a large number of jobs in related industries, and is an essential part of the production process. It clearly gets a lot more

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