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Has the Real Estate Bubble Popped?
by: Chris Ciabarra
According to a story from Public Radio International’s radio show
Marketplace, the average price of a new home was down 9.7% last
month from the same time last year, and that’s the “biggest plunge
in 36 years.” At the same time, new home sales are up slightly
because sellers are lowering prices significantly. But the big
question is, when will the real estate bubble pop? Or has it popped
already?
The truth is that the swift rate of price appreciation and
construction in past years created a bubble in the real estate
market that has in fact recently popped. According to economic
expert Christopher Thornberg, “The bubble’s popped, and it’s going
to take time to work its way out of the system. There is no soft
landing here, we haven’t found the bottom.” Especially along the
East and West coasts, the housing market swelled enormously since
2000, with prices and sales up over 30%.
Many have reported a slowing of home sales, even in real estate hot
spots like Southern California and the Bay Area. Signs declaring,
“reduced price” in front of homes along oceanfront property in
Venice and Hermosa Beach, CA, confirm that the real estate bubble
has popped. The major issue for current homeowners is that as prices
drop, so do home values. And as a result of skyrocketing prices,
many were forced to settle for adjustable-rate-mortgages (ARMs),
allowing them to purchase houses in desirable areas that they could
just barely afford. Over one third of home loans in the last five
years were adjustable.
It was reported on National Public Radio’s Morning Edition on
October 27, 2006 that ARM rates have now begun to rise, leaving
millions of homeowners with higher mortgage payments. Experts expect
that in the next several years ARM rates will continue to increase,
a change could have disastrous results for the housing business. The
combination of rising interest rates and a popped real estate bubble
means that homeowners will often be unable to sell their properties
for what they bought them for.
Some analysts even believe that a collapse in housing could bring
down the U.S. economy and create another recession. A burst real
estate bubble could have dire consequences for the national economy.
750,000 real estate foreclosures are expected over the next five
years. Homeowners are being forced to look at their options. The
main recommendation of real estate agents and lenders is to find a
way to get out of your adjustable-rate-mortgage or equity line of
credit and find a more stable loan. Even if this means paying
certain one-time fees, the savings will be considerable in the long
run and could help thousands keep their homes. Lenders all over the
U.S. are reporting that customers are coming into their offices to
do whatever they can to get a fixed-rate mortgage.
Refinancing is the Best Option
If you’re a homeowner, you should think about the best way to
safeguard yourself against rising interest rates. Mortgage
refinancing is the choice that many are making in order to preserve
their financial stability. I personally looked into refinancing with
http://letsrefinancenow.com, and I’ve been pleased with their
interest rates and customer service. My wife is Spanish-speaking,
and they were able to accommodate her language needs. There are
other companies out there, such as the Loan Store and Countrywide,
etc, but when explored their offers I wasn’t impressed. If you’re
looking for a company that won’t treat you as another number in
line, you should definitely consider Life Planning Network. They
were friendly, and put me at ease.
Refinancing will allow me to switch from an ARM to a fixed-rate one,
with fairly little hassle. I know that whatever fees I will have to
pay now will pay off in the long term, since interest rates are
likely to keep rising indefinitely. I am tired of having to worry
about my family’s stability, and whether or not we can keep our
home. I want to know that my children won’t suddenly have to move
just because I didn’t watch the real estate bubble and find out
whether it was going to pop soon. After finishing the refinance
process, I’ll feel secure knowing that no matter what happens with
interest rates, I will pay a stable mortgage payment every month and
be in control of my own finances.
Once again, due to the instability of the market, you should
refinance your ARM or balloon mortgage to make it a fixed-rate
payment as soon as possible. As for the economy, is it in for a
crash? I don’t want to cause you to panic, so I’m not going to say
either way. But if you want to protect yourself against the popped
real estate bubble, it’s best to refinance so that you can keep your
home in the long term.
To stay current on trends in the real estate market, I’d recommend
going to http://www.bubble-real-estate.blogspot.com. Also, be sure
to check out http://thehomeequitymortgageloan.com for the latest
refinance rates and more tips on refinancing. Ask any real estate
expert, and they’ll tell you that now is the best time to take
advantage of refinancing. In five years, you’ll thank yourself.
About The Author
Chris Ciabarra has a Master’s in Business from Alvernia College. He
has worked in various financial and utility companies, and now is a
business consultant in Los Angeles.
Blogs
http://www.bubble-real-estate.blogspot.com
http://promote-band.blogspot.com/