Wednesday, March 28, 2007

Which Side to Be On?

The decline in the housing market and decrease in almost every measure of housing conditions has been at the front of the business world for several months now. The idea of a national housing market has long been ignored and put off due to the local nature of housing prices. Though it seems apparent we could be in the midst of a national housing bubble during 2007. Economists have different positions on what to expect. Many feel that the housing market will continue to decrease to the middle of 2007 and start to level off while others feel that the market will continue to decrease until 2008 and few believe the bubble will burst causing many economic problems for investors, homebuilders and many financial institutions. In response, there has never been a year with the average national home price decreasing for the entire year, so it would be smart to assume that the market will rebound before the years end. Though with recent economic reports that February set several low records for housing the argument that a housing bubble exists is set in stone. The real question is whether the bubble will lead to economic problems or a recession. The housing bubble has, yet to cause any drastic problems outside of loan tightening and a housing slump. No other sectors have dropped considerably besides housing, though the overall market can and has had down periods when significant negative housing numbers are released. In my argument I understand that housing bubbles are important to the economy to help alleviate high prices and level out the real estate market, though a strong national housing bubble could be disastrous, it is unlikely to occur due to the local nature of real estate prices.  So, in turn housing bubbles are a natural and important occurrence in the economy and the current housing bubble will not cause huge economic problems in the United States.


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