Summary:
The article I chose is called “Home prices fell in August, near lows.” It talks about how the prices of single-family homes fell for a second straight month in August due to the raised amount of foreclosures. The article discusses how due to the “flood of foreclosures”, home prices will likely be low for some time. The article also says that the expiry of home buyer tax credits earlier this year caused the housing market to struggle. The S&P/Case Shiller composite index of 20 metropolitan areas in the US saw a decline in 0.3% in August from July. S&P also saw that seventeen of the 20 cities were weakening in long term, year-over-year figures. S&P said this indicates that “the housing market continues to bounce along recent lows.”
Connections:
In this article, I have found factors affecting both supply and demand. The factor affecting supply is the the price. The large amount of foreclosures, and homes on the market has caused the prices of single-family homes in the US to fall. Foreclosures happen when people can't pay their mortgage, and the bank takes back the house. The bank then sells the house for a discounted price. The demand for homes has also fell in the states. This is due to 2 factors: The incomes of the people; and expectations of futures incomes. The recession in the US has caused many people to be out of work, and not able to pay for extra expenses like buying a home. Both factors: the decreased demand for homes; and increased supply of houses going on the market, pushing on the market, is what caused the prices of homes to fall and “to have stabilized at new lows.”
Reflection:
I think that the banks have to work with the people in danger of losing their homes, before they foreclose it. So many homes on the market are foreclosures sold at lower, discounted prices, so those who do want to sell their home have to compete with those lower, foreclosure prices, for a sale causing the market prices to fall. If the bank helped those who couldn't pay their mortgage, there wouldn't be as many foreclosures, and the housing prices would rise. In reality though, the banks wouldn't help those in danger because the banks make money off of the foreclosures, and they wouldn't give up a profit.
I think your point "those who do want to sell their home have to compete with those lower, foreclosure prices, for a sale causing the market prices to fall" was really interesting and i totally agree with you. It's too bad the banks, like you said, won't give up their profit in order to aid those who can't pay their mortgages. Perhaps someone in the bank industry should come up with a way for people to be more secure in a recession.
ReplyDeleteIf no one does anything about this problem then there's going to be a whole bunch of houses on the market but no one to buy them.