According to regional and state real estate analysts, the factors which previously fueled the housing boom of the last few years are easy to explain. The factors that fueled this boom in the real instate industry ranged significantly, including:
- Interest rates that were historically low.
- Flight-Risk Safety Investments for Foreign Investors hailing from South America, Europe, and Asia.
- Heightened speculation and demand.
These are among the greatest leading factors that brought on the fast pace of not only home development but also condominium development as well, as well as the more affordable options, which are usually converting rental apartments into condominiums. Generally, most of the foreign investment market took the form of current places based on the weakened value of the United States dollar.
Speculators Creating Heightened Demand for Homes and Condominiums
Housing market watchers have definitely noted that a segment of the housing market was the main cause for creating a large demand for condominium developments and new housing projects. This housing market segment was generally based on pure speculation and had a lot to do with flipping. This segment quickly satisfied the underwriting requirements that lenders had pre-sale. When it became clearer that this activity was based on buyers intent on speculating pre-construction condominiums and other housing products, the lenders began to require that limitations be placed on these activities by development borrowers, taking on the form of a wide variety of different contract provisions. These contract provisions included the prohibition of contract assignments to buybacks, the sharing of profits in the event that flipping occurred, and the rights of first offer refusal.
Because local buyers are beginning to stay off, foreign buyers are taking control of the current condominium market, and the housing market is experiencing significant change as a result. The condominium frenzy has since cooled off significantly because of the credit crunch and the fact that local buyers are changing the way they regard their finances in these times of financial trouble. After the condo boom was experienced over the span of the last three or four years, the pace of development has significantly cooled down, since everyone is experiencing a slowing of the economy, including individuals and businesses. The US dollar is currently weak, and so investing in real estate is not the smartest move for most investors as a result. The condominium frenzy has definitely cooled off as adjustable and variable mortgage rates take over low initial teaser rates, and some condo buyers find themselves dealing with heavier, more painful mortgages than what they allowed themselves to expect. According to people observing the market, some residential sectors and regions are definitely a lot better off than others when it comes to investing in real estate. Investment buyers are being forced to look more deeply into potential investments, looking for sound investments that they can personally use rather than speculating about the future of specific properties, which is no longer the safest or most advantageous way to purchase real estate of any kind.