Unwanted Scenarios

Real estate speculation and overvaluation have led to cheaper properties in the U.S., possible scenario in the case of other countries too. The American market has gone through difficult moments. Housing prices have fallen, and the number of transactions has fallen too. The causes are speculative transactions and credits contracted for overvalued property.

David Segrest, member of National Association of Realtors (NAR-association of real estate brokers in the U.S.), where he is a lecturer for the training of agents in Europe to obtain the status of Certified International Properties Specialist, and also NAR’s ambassador for the relationship with Argentina, talks about the reasons for the fall of areas on the American foreclosures market.

He also talks about dangers that threat markets in other countries too. Even if he does not make specifications, it is known that in other countries, as well, there are speculative transactions and houses are overvalued.

In the U.S., housing prices have declined in recent months. What are the causes? What should be understood is that the U.S. is not a single market. Each area has its own specific market. Moreover, there have been many areas in the last three-four years, this being the biggest areas, where prices have risen by 30-40% annually.

They have even reached the point when people have speculated foreclosure aspects and have bought any property regardless of the price, knowing that in a year they will sell it out for a lot of money.

This increase of prices, which has been produced, is artificial. In the end, on these market prices fell at the real value of properties. In Miami, Florida, there were apartments overlooking the ocean.

Many investors from South America and Europe have started to buy properties in phase of pre-construction, knowing that for the project to be completed still two to three years are necessary. Then they resell the property when the price increases without finishing it.

Most of these properties were built at the beginning of a year and people had contracts for several apartments at prices ranging from 500,000 up to 3-4 million dollars and had no money to buy them all. Therefore, there were foreclosed properties, but there were no buyers, especially at their ridiculous prices.

If we look at markets such as California, prices fell by 3-4%. In southern Florida, prices have decreased by 15%. In many cases, there was not the decrease of prices, but the fact that people no longer sold because prices were the same.

Have banks been affected by this phenomenon? The segment of real estate loans had some problems, but the situation was completely different. People who were considered debtors by the lending institutions were so desperate to have a house that they were willing to accept a loan for a property at an interest, which is much higher than the usual one.

Most of them did not know certain foreclosure details and used to buy some houses whose value was quite low. Buyers realized only after they had moved house that it was not worth the cost paid by them.

1 Comment »