Real Estate Decline

Dear Reader,

This week while reading the Financial Times I noticed an article that caught my attention. The article is entitled "Decline in house prices gathers pace". This article really interested me since I enjoy reading and keeping updated with real estate. It is quite interesting to see how the real estate market has been doing since the 2007 financial crisis. 

As we all know, many countries in the world including the United Kingdom, the United States and many countries in Asia and the Middle East saw falling real estate prices after 2007 which caused many people to lose a lot of money and many insecurities around the world. The real estate prices in the United Kingdom saw a rise over the past two years yet according to the article they are again starting to fall. many real estate professionals reported falling prices in the month of October. A survey conducted by the Royal Institute for Chartered Surveyors shows that 55% of the people surveyed believe that they have seen a downturn and falling prices while only 4% reported about rising prices.

http://www.foreclosuredeals.com/images/house-for-sale.jpg

Not only did the real estate prices fall in October, it was also the first time in eight months that fewer homeowners put their home on the market, people do not think that it is the right time to sell now. According to the article people are getting scared, and they do not feel safe about buying or selling a house anymore. On a more positive note though, the article also mentions that the prices will most probably not drop any further since fewer houses are being built and there is less supply. 

After the financial crisis people have become extremely skeptical about buying a home and the weakness of mortgage finance availability is making it much harder to buy homes, particularly for first time buyers. Renting has become much more popular and "safe" since the risks are much lower and people have to think of less issues and problems to deal with. 

I also found it quite interesting that at the end of the article, the author also mentions that according to the British Retail Consortium there has been a 2.4% rise in total sales this month, which is quite low when compared to the 5.9% rise seen in the same month last year. The total food sales on the other hand rose by 4% in the past 3 months compared with last year.

All this data shows that people have become a lot more conservative with the way they spend their money. The financial crisis affected almost everyone, and 3 years after the start of it, people are still suffering the consequences. In the United Kingdom much less money is going into clothing and luxury items while more money is being spent on food. People need an incentive to start buying again and keep the economy running. I believe that it will take quite a long time for people to gain that trust again since they have realized that it is better to save in case hard times come again, as Benjamin Franklin said "a penny saved is a dollar earned". 

Have a good week,

The Financialista 

Financial Times:
Pimlott, Daniel (2010) "Decline in house prices gathers pace" Date Viewed: 10th November, 2010. Available online at:

http://www.ft.com/cms/s/0/abba118c-eb70-11df-b482-00144feab49a.html

Images:
Foreclosure Deals (2010) Date Viewed: 10th November, 2010. Available online at:

http://www.foreclosuredeals.com/images/house-for-sale.jpg