Just a curious question on the housinf crisis.

Published on October 16, 2008 By CharlesCS In Current Events

Keep in mind that I am not well educated in the housing and financial world so forgive me if my question comes of as some what stupid.

With housing prices dropping more and more due to the values dropping, it would seem that buying a house (ignoring wages and unemployment for this question) at this moment seems like the best time ever. I mean I have seen house go from over $500 thousand to within the range of $150 to $200 thousand. That is basically buying a house for less than half of what it was worth at one point which to me sounds great considering i could still say it was a $500 thousand house at one point and could be again in the future.

So my question is, if unemployment was to go down and wages somehow rose and houses being this cheap, would this allow for a boom in the housing market again and in a way start to stabilize our economy, taking into consideration that the banks will actually be more responsible with the loans they make? Obviously houses will begin to go up in price (if I understand correctly how that works) so that may not hold for long and considering credit will be much more tighter due to todays issues, would make it harder for people to buy a house. But I still wonder if this could happen, meaning that things may not stay bad for very long and we could see our economy become strong again in the long run but in the near future rather than decades from now.

Just wondering, I am looking to understand where we are at today and how this could be beneficial in a way in the future. Sorta like letting the weed out grow the grass so it can be visible, be taken out and leave the green grass only, or mostly anyways. I just don't wanna think this would be something that could last for decades and leave us in ruins.

Comments

Leauki

on Oct 16, 2008

So my question is, if unemployment was to go down and wages somehow rose and houses being this cheap, would this allow for a boom in the housing market again and in a way start to stabilize our economy, taking into consideration that the banks will actually be more responsible with the loans they make?

Yes.

As for the interplay of wages and available property, that's a more complicated subject. Generally you get higher wages if there is more land available. But I don't know how that interacts with nonproductive (residential) land.

CharlesCS

on Oct 16, 2008

Yes. As for the interplay of wages and available property, that's a more complicated subject. Generally you get higher wages if there is more land available. But I don't know how that interacts with nonproductive (residential) land.

So what you are saying is that I can be a bit more comfortable rather than paranoid with what is going on in the economy since the chance of all this correcting itself is very likely and hopefully in a near future?

Leauki

on Oct 16, 2008

You may end up a victim of the crisis, but my guess is that the crisis will be over within two years, with the downturn not lasting longer than a few months or at most a year.

But I am not an economist.

It's basically down to when people realise that we are still capable of producing and consuming just as much as before.

just john

on Oct 16, 2008

The biggest issue now is that unless you are sportin' near perfect credit or have a really fat back pocket, you still can't get a loan on that bargin of a house.

CharlesCS

on Oct 16, 2008

You may end up a victim of the crisis, but my guess is that the crisis will be over within two years, with the downturn not lasting longer than a few months or at most a year.

But I am not an economist.

It's basically down to when people realise that we are still capable of producing and consuming just as much as before.

Like you, I am not an economist either, but some of this stuff seems obvious enough for the average person to see and understand. Ironically, many of the issues we have today are not as complex as many portray them to be which is a shame considering how so many are so ignorant to how things work in this country and will vote for someone just because he can take something simple and make it sound complicated then throw a solution as easy as putting abag of popcorn in a microwave and people eat it up.

Dr Guy

on Oct 17, 2008

There are basically 2 reasons to buy a house - for shelter or for profit.

For Shelter, right now, yes. With Housing prices falling (and in a few months mortgage rates will continue to fall), it makes more sense to buy instead of rent.

For profit? The market is trying to find a bottom - and may have, but if you are looking for an investment, it may not be a good time. The people that know the market are the ones going to get rich on it right now.

But I will add a 3rd reason (that is just a corollary of the second). If you are looking for rental properties, due to the rent market still being high, it is not a bad time to buy either. Even if the property depreciates more, you have a solid income, and the prices will go back up in time (the amount of time is the kicker).

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