Real Estate Housing Market Crash
The real estate housing market crash that occurred in the United States was the result of the Subprime mortgage crisis and the housing bubble. The housing market peaked in early 2006 and began its downward spiral in 2007 and 2008. In 2011, housing prices reached new lows. Since the crash, housing prices have fallen about 40%.
Supply and demand dynamics in real estate market crash
In a real estate market crash, supply and demand dynamics become crucial factors. Before the crash, the marginal probability of selling a property exceeded the marginal probability of buying it. After the crash, this ratio starts to decline and buying becomes more attractive. This dynamic is called market equilibrium. However, it cannot explain the differences between expectations and actual outcomes, as the skewness of the distribution shows.
This is a consequence of the fact that the housing market does not clear immediately. Moreover, the process of getting out of disequilibrium has costs on market participants.
Subprime mortgage crisis
The subprime mortgage crisis was caused by the earlier expansion of mortgage credit that fueled home prices. Traditionally, potential homebuyers had a hard time obtaining mortgages, and lenders generally turned them down. However, there were exceptions, and some high-risk families were able to secure small mortgages backed by the Federal Housing Administration. This situation allowed home prices to rise exponentially, and homeownership rates were relatively low. Moreover, the growth in home construction mirrored the swings in mortgage interest rates.
This led to a huge loss for many banks and investment banks. Mortgage-backed securities (MBS) declined in value as well, which resulted in a huge loss for investors. As a result, many homeowners couldn’t afford to keep their homes. As a result, many filed for bankruptcy or lost them to foreclosure. Eventually, the subprime mortgage crisis and real estate housing market crash triggered a downward spiral in house prices.
China’s invasion of Taiwan
In the wake of China’s invasion of Taiwan, many people are worried that the island’s real estate housing market could crash. The Chinese Communist Party’s stated goal has always been to reunite Taiwan with the mainland. The party’s general secretary and chairman of the Central Military Commission, Xi Jinping, has made it his personal mission to make Taiwan part of China. In fact, there are many who believe that the invasion is imminent.
The PLA has nearly one million ground troops and thirty infantry divisions, whereas the ROC has only 130,000 active-duty ground forces and 260,000 reservists ready to mobilize in the event of an invasion. China’s navy is also large, with 360 combat vessels and a massive merchant fleet. The ROC has been building up its defenses for decades and has a massive tunnel system honeycombed into the island’s beaches, which would protect the defenders and provide interlocking interior lines of communication.
Homebuyer fatigue
Homebuyer fatigue has hit many home buyers hard in the current real estate market. After experiencing record-high home prices, ruthless bidding wars, and offers ten to twenty percent over the asking price, some are taking a break from the housing market. Others are even considering quitting the market altogether. Some are afraid that another housing bubble is about to burst. However, real estate experts believe that this is not likely. Some buyers were priced out of the housing market and simply don’t have the money to purchase a home.
Home prices have reached a high point, but a crash is far from imminent. Many economists point to several reasons why home prices won’t plummet any time soon. First, the lack of inventory is a big reason for rising prices. There aren’t enough homes on the market to satisfy all homebuyers.
