You might have heard many people talk about the real estate bubble, this is used to describe when the prices of property expand very quickly. This results in an over inflated market which causes buyers to purchase property at prices above the standard value of the market. They are also scared that the bubble will burst and the property prices will fall quickly. It can be risky for people to buy in this market.
It is very difficult to actually say when there is a real estate bubble, and when it's just a hot market. It is hard to quantify a real estate bubble, this means that we have to rely on the opinions of experts. Even the experts sometimes struggle to differentiate between bubbles, and a boom. Some mortgage companies study the market and compile reports to warn buyers of potential problems.
Homeowners that buy in a bubble are putting themselves at an increased level of risk due to the financial health of the market. This is particularly important if the homeowner has very low equity in their home. Equity is the amount of your home which you own, you will have to pay off the bank until you own the whole house. If the bubble bursts then you could find yourself paying owing more money that your house is currently worth. Of course this loss will only become a noticeable problem if you come to sell your home. Property values always fluctuate on a regular basis, sometimes with quite dramatic changes in value. You can avoid losses by staying in your home until the value rise again. If you have to move before the market has risen then you could be in a negative equity situation which could affect your ability to buy a new home.
If you have a greater value of equity in your home then this will not be a serious a problem. It also won't be a major problem if you are able to absorb the loss.
If you're a person of an average financial means and want to buy a property while there is a real estate bubble then you should be very cautious. Make sure you are fully aware of any potential losses, make sure you do some homework before you buy the property. Track the fluctuation in your local market for a few months, and then use this information to decide whether the benefits outweigh the negatives.
Just practicing common sense should be enough to protect you from a bursting bubble. It is a good idea to minimize the amount you owe on any properties so that you can manage the financial burden if you have to move when the market is in a decline.
Improve the value of your home rather than splashing out on impulse buys. You should be able to recover around 80% of the costs of remodeling a kitchen or bathroom when it's time to sell. The best way to minimize the risk is to buy a house which has very good resale potential.
Peter Mason's reports can be encountered on numerous online sites related to property costa blanca spain. Sharing his passion in writings on costa blanca properties the columnist expressed his expertise in the field.
Post a Comment