6 Reasons Housing Market Prices Fall and Cause Money Pain

Stock market investors understand the financial risks involved and accept price falls from time to time but the same isn't necessarily true of housing market investors.

Not many people who buy houses are financially prepared for the fact that housing market prices do fall from time to time causing money pain.

This might be because stock investors can protect themselves against price falls through swing trading, however, there’s no easy insurance against housing market falls.

Why Housing Market Prices Fall

1) Increase in Interest Rates

Interest rates are critical to the housing market since when interest rates increase, there will be an increase in consumers’ total monthly mortgage payments.

So basically, a rise in interest rates makes mortgage payments difficult for homeowners, and this will eventually decrease the demand for houses leading to prices falling.

Recessions can lead to an increase in unemployment and lower household income. In recessionary environments, home buyers and real investor investors tend to be defensive, lacking the predictability required for a significant investment like a house purchase.

2) Economic Recession

Additionally, recessions can impact existing homeowners who, faced with unemployment, can fail to maintain mortgage payments leading to an increase in bank repossessions.

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