Will 2014 Witness Another Housing Bubble?

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housing bubbleThe housing bubble is a story that is quite a few years old now. Despite this, you still hear about it in the real estate industry. After all, it is an episode that will not be forgotten for quite some time, especially since the effects are still visible in some of the markets even today. Considering the fact that the housing bubble was disastrous for the real estate industry, you might think that all efforts will be made to prevent another one from occurring once more. However, unfortunately, that is not so, and there are many people who would not be surprised with another housing bubble.

In the real estate industry, home prices are on the rise in every area. For people with underwater mortgages, this is great because their equity values can be positive once again. For the economy, this is excellent so why might a housing bubble loom up this year? Here are the reasons which the industry experts can pave way for another housing crisis.

Mortgage rates are increasing

Though mortgage rates are still historically low, you cannot ignore the fact that they are being increased. While the lenders can enjoy this, homebuyers definitely are not going to. As for a shift in trends, that is not in the forecasts right now. The federal government has announced that bond purchases are going to be reduced by $10 billion per month. As such, quantitative easing or QE3 can influence the interest rates and cause them to rise.

So whether they are mortgagees, bonds or any other reinvestments, the rates will likely increase.

Sales are declining

In the past three months, home sales have declined continuously. The market has not lost its popularity when you factor in the fact that over 5 million houses were sold in the last month. Since 2007, this is the highest number, but what about years before that when the industry had not experienced any crisis? Sales were greater than the numbers recorded in 2013.

Home builders want more money

In the month of December, the construction pace which was recorded was the greatest figure in the past five years.  The problem is that the average price of new homes has also increased by 21%, and is now above $700,000.

Whether the housing bubble will happen this year or not cannot be said with certainty, but one thing that is very obvious is that the market will not perform as well as it did in 2013.

Source: www.dailyfinance.com

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