The Housing Market Crash and Its Effect on Real Estate

The financial crisis of 2007 and 2008 caused a turmoil in many aspects in the United States, including the housing market. In fact, it was stated that this event caused an even bigger disruption in the U. S housing market since the Great Depression (Garber, 2016). This situation would eventually cause an increase in renters and a decrease in homeowners as the years went by. Due to this, the demand for buying and selling properties would flounder, affecting not only homeowners but those in the real estate industry as well. Lenders also became quite reserved in providing future home loans, as the number of foreclosing properties began to grow in exponential numbers. It was a devastating occurrence that affected people’s jobs, investments, finances, and pensions, and as such, the housing market definitely experienced this notion.

During the housing bubble, bankers, homebuyers and even Wallstreet believed they were safe to purchase properties and thus require a mortgage in the process. Those with poor credit rating as well as financial instability were provided loans for which they could, in all honestly not afford (Tanneeru, n. d. ). These were known as subprime mortgage loans, which included very high-interest rates as they were taking a risk lending to such clients (Tanneeru, n. d. ). During this process, Wall Street would buy and sell these mortgages to investors, without realizing the downfall to the housing bubble was imminent (Tanneeru, n. d. ). Eventually, the bubble would burst due to the mortgage interest rates going up, the value of the homes dropping, and people losing their means of income (Tanneeru, n. d. ). As many rushed to sell their properties, including homeowners and banks, the market was flooded with unsellable homes and unpaid mortgages (Tanneeru, n. d. ). This would then create the market and financial crisis that would impact the United States in 2008. As such, stated below are examples for which display how the crisis impacted and changed many aspects of Real State.

• Implementations into the law stated that no longer could people obtain such loans, without definitive proof of employment, and as such, those that were self-employed, received bigger scrutiny than those in other means of employment. Due to this situation, they struggled to obtain these loans and thus were unable to refinance their properties. This lead to a huge loss in the value of their homes and equity.
• As the value of the homes rose rather quickly in the early 2000’s, owners began to use the equity of their home to remodel their properties, buy vehicles and pay other debts. When the value of the properties began to drop, and homeowners were unable to repay these second loans, the value of their home was now being appraised at less than what they owed in repayments. This would then lead lenders to either change the amount of credit they would allow for extension or removed such programs options indefinitely.
• From this situation, many changes have occurred that will not only impact the future buyers but the lenders and sellers in the housing market as well. One of the biggest issues that arose from the crash was the need to increase the money down needed to be approved for the loan. Those with poor credit ratings or very little to no savings would now struggle immensely being able to purchase their first home.
• The mortgage insurance used to be an available choice for those that were able to put a 20% deposit on mortgages backed by the FHA, but not a necessity. Since the events of the crash, it is now imperative that no matter the amount used as a down payment, the buyer still must acquire mortgage insurance for the loan (Curry, 2013).

The aforementioned situations unquestionably caused an impact on new and returning homebuyers, but what is often not discussed is the repercussions it had on real estate agents. A real estate agent is an individual whose main purpose is to take care of their client’s needs, whether it be a seller or buyer (Johnson, 2018). They are tasked with important aspects, for instance, finding and presenting properties for interested buyers, using their strong negotiating skills to make offers on such properties, conducting research on the property, marketing the properties for the sellers, and discussing the paperwork and other important documents with both the buyers and sellers (Brightwood Real Estate, 2017). The entire basis of a qualified agent falls under the fiduciary duty, which discloses that the agent must be loyal to their client; respect the confidentiality of information they acquire about and from their client; they must adhere to any and all instructions stated by the client regarding the property; they must be competent and diligent throughout the buying/selling process; and they must be honest concerning the financial actions they take on their client’s behalf (Theoharis, n. d. ). Referring to the previous statement regarding the housing market crash and real estate agents, they were unfortunately heavily impacted, career-wise, by the events that occurred.

For instance, in Arizona, almost half of the real-estate agents were basically forced out of the industry (Corbett, 2012). Due to the inability to sell any of the homes affected by the crash, and the need for an actual stable income, they had to, unfortunately, make the decision to part ways with the business. As Rebecca Grossman, the president and CEO of the Scottsdale Area Association of Realtors stated, “you saw during those years that Realtors had to weigh the economics to decide about staying in the business as a primary income generator, when the market is like that, if you're not truly committed it's difficult to make a living” (Corbett, 2012). Understandably, the condition of the crash had left many homeowners fearful of not being to sell their homes at their true value and concerned of the uncertainty of the economy’s state, thus refusing to put their properties on the market (Agents: Market isn't as fun, 2016). This, of course, has left the housing market with fewer houses to list and making the competition for commission among real estate agents, that much fiercer. As the years progressed, real estate agents (and brokers) are seeing a slow increase in property sales and purchases. Listing shortages are still a major factor in determining the current success or decline of the housing market.