California Housing Market Essay

1021 words - 4 pages

The Housing Market in California has been exploited and abused by the government, and Banks. People had made a huge profit of medium class working people by selling over priced properties, promising the American dream. However, a so call, bubble is bursting and a bubble can be defined as, "a price level that is much higher than warranted by the fundamentals" ( These bubbles occur when prices continue to rise for no other reason than investors believe these investments will continue to rise in value and subsequently be sold at even higher prices. There have been many debates for the past few years as to whether a bubble exists in the real estate market or if the market simply exhibits strong fundamentals. There have been countless books published on how to make money by investing in real estate and flipping properties, with only one published on "How to Profit from the Coming Real Estate Bust". Upcoming price corrections in the real estate market will have an impact on the entire economy as financial institutions become in danger of credit risks.How all these people benefited from the outrages and criminal act of the California housing market? The Government never warned or did anything to prevent the abuse on the real estate market. The, State and Federal Governments could had regulated the sales of the homes based on the plus or minus percentage of the based appraisal price based on the National Market, and not based on demand and supply.However, the local government and counties benefited from the abuse, of the overpriced housing as they collected huge profits on the sales and property taxes. However, the government benefits from the tax collection as has been spend back in to the communities, parks and maintenance of the county.The Banks and financial institutions on their desperation and the opportunity to make money decided to have created finances with no income verification or complex teaser rates for individuals that could not really afford those over priced houses in the first place. Today the same Banks have either sold those loans, gone out of business or are taking huge losses on the same homes that they intended to make profits on. Mortgage brokers hire appraisers and Banks, so they are going to give the appraisals that mortgage brokers and Banks want to see, and not the truth. Appraisers that tell the truth do not get called back, to do other appraisals. The true damage from these new kinds of mortgages will come in time as interest rates rise. When the long-term interest rates begin to re-align with short-term rates the impact on prices could be devastating. Interest rate movements could force some homeowners into foreclosure as monthly payments have the ability to more than double with these "exotic", as Greenspan has described them, mortgages. This is also an opportunity for those investors or people that are looking for homes at a very reduced price. The tragedy of one family could be the opportunity for another...

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