The real estate market is a part of the economy. Thus, what happens to it affects the economy too. Likewise, the events in the economy also affect the real estate industry. The economy faced a lot of challenges in the recent years. Consequently, the real estate realm also faced the same ordeal. This proves that there is indeed a significant relationship between the two.
The state of the economy definitely affects the industry. There have been positive effects in the past. People tend to shift their investment to the real estate when the economy is heading a downturn. Most will pull out their stock investments because they are uncertain of what will happen to the economy. Real estate on the other hand seems to be a more tangible asset that can safeguard their wealth.
However, all of that changed in the recent financial challenges faced by the country. The real estate industry has been gravely affected. This is due to the many events that ultimately led a lot of homeowners to give up their property.
How did this happen? This did not happen overnight. It took a series of events. Although many are pointing fingers, everyone contributed to how the economy fell. Many consumers relied on their credit card, spending more than their means. Individuals are not the only ones doing this. Companies are making unwise choices as well. Many thrive on credits, and it seems to work for a while. However, the unthinkable happened. The financial assets of the leading companies depleted, even to the point of bankruptcy and the first casualties, the employees.
Since many are losing their jobs, many are unable to pay their credit cards as well. In addition to that, many fail to settle their mortgage on time. The foreclosure rate skyrocketed and this started a meltdown in the industry. The number of foreclosed properties pulled the value of the properties down. In addition to that, the number of sellers in the market increased. This is accompanied by the decrease of the number of buyers in the market.
The number of buyers is low for various reasons. One is the lack of confidence that people have in the economy. The consumers want to hold on to their finances because they are uncertain of what will happen to the market. Additionally, many are not thinking about purchasing a home because of the unemployment rate. Many are saving because they fear that they will lose their job anytime soon.
There are also some positive changes brought by the crash in the economy. It has paved way for the property rentals to boom. More and more occupants are looking for a home to rent. This opened great opportunities to investors.
There were also major changes as to the procedure of the loan application and home purchase. New provisions were implemented to protect the consumers better. There were various incentives given out to encourage more individuals to purchase a home.
Today, the economy and the real estate industry are showing signs of recovery. Although they have not fully recovered, they are showing promising improvements.