| If you were buying or selling a house (or in my case, | | | | bound to burst. All good things must come to an end." |
| both) in the last few years, you are familiar with the | | | | A real estate agent is the first to introduce me the |
| term 'housing bubble'. If you are trying to sell a house | | | | 'housing bubble' term. Is it possible that real estate |
| today, you are most likely feeling the effects of its | | | | agents also had some hand in causing the whole |
| 'burst'. But for some reason, when you try to locate a | | | | housing bubble effect in the first place? When real |
| clear definition by doing a Google search (i.e. "define: | | | | estate agents sell homes, they are paid a commission. |
| housing bubble"), the resultant page proudly declares: | | | | Although the average commission is currently 5%, it is |
| "No definitions were found for housing bubble." Can | | | | down from 6% which was the average rate from |
| you believe that? American homeowners are feeling | | | | 2002 through 2005. The higher the price of the home |
| the effects of a term that has been used at least | | | | that sells, the more the commission that is paid. |
| since May 31, 2005, when we were warned of its | | | | According to a recent study by Standard and Poors, |
| potential collapse on The NBC Nightly News with Brian | | | | home prices increased the most between January |
| Williams in a story by Chief Environmental | | | | 2004 and December 2005. Now remember, lenders |
| Correspondent, Anne Thompson. The term was | | | | are lending more money to more people. A 6% |
| broadcast to tens of millions of households in America, | | | | commission for a home priced at $249,000 is $14,940. |
| remains in common speech, yet in the matrix of the | | | | A 6% commission for the same home priced at |
| country's biggest algorithm, there is "no definition". | | | | $279,000 is $16,740. The difference is an additional |
| Wow. | | | | $1,800. If loan funding is not an obstacle, why wouldn't |
| So who, or what, is responsible for the housing bubble? | | | | real estate agents advise sellers to sell high in order to |
| Why did it occur? I did a web search to see what | | | | make more commissions? |
| other people were thinking about the subject. I found | | | | If you think about it, real estate agents always advise |
| that people are talking about the housing bubble burst, | | | | sellers of listing prices, and most times those listing |
| blaming the lending industry, the Federal Reserve, the | | | | prices are based on the current state of the lending |
| government, zoning laws, teacher's unions, and even | | | | industry. If agents are noticing that more borrowers are |
| the weather. But I found little discussion about what | | | | being approved to borrow more money, they are |
| caused the actual housing bubble itself in the first place. | | | | going to encourage sellers to sell high. Of course, they |
| And so I ponder... | | | | will tell the seller that they can "take advantage of all |
| The first time I heard the term "housing bubble" was | | | | the equity in the home" by selling high, but in the end, |
| from a real estate agent in early 2004 as I inquired | | | | the higher the sales price, the higher the commission. |
| about purchasing an investment home. At that time | | | | Do you remember between 2003 and 2005 when |
| mortgage interest rates were low, mortgage brokers | | | | becoming a real estate agent was a booming career? |
| could create special programs to fund mortgages, and | | | | Now many licensed real estate agents have other |
| much of the real estate around me was being listed at | | | | "day jobs" because homes are not selling as |
| continuously higher prices. Real estate investors were | | | | frequently, or as pricey as they used to. I believe real |
| in a house flipping craze and new homebuyers were | | | | estate agents definitely contributed to the cause of the |
| qualifying for home loans at record rates. The housing | | | | housing bubble, and now they too are feeling the |
| market was a real estate agent's dream. My real | | | | effects. |
| estate agent, anxious to make a quick sale, told me | | | | Fortunately, home loan interest rates have returned to |
| that I better not wait too long before I decided whether | | | | low, pre-bubble levels and home prices are not as high |
| or not I was going to purchase the property I was | | | | as they used to be. It is a good time new |
| interested in. She told me "the housing bubble has been | | | | homeowners to take advantage of low loan rates |
| blowing up for a couple of years and it won't be long | | | | coupled with lower home prices. It is also a good time |
| before it bursts." I gave her a slightly confused look as | | | | for current homeowners to save money each month, |
| she continued, "If you got in when the getting was | | | | refinance their mortgage, and get a lower rate or |
| good, you invested in property between 2002 and | | | | better terms. And finally, if your home is valued at a |
| 2003. Investments were cheap to buy and easy to sell. | | | | lower price than what you paid for it and you are not |
| The appraisers are helping us out with home values | | | | ready to move, get your home reassessed. You may |
| and the lenders are funding the loans. Homes are being | | | | be entitled to a reduction in your property taxes based |
| sold at good prices today, but they are not going to | | | | on the new assessment. |
| hold their value for too much longer. The bubble is | | | | |