Foreclosure Facts

Posted on October 31st, 2008 by saman

Wall Street has faced unpleasant moments lately. The same has happened with the USA this year. Nevertheless, in other parts of the world those who are interested in purchasing a luxury property are very lucky.

Whereas properties’ prices keep decreasing, reaching in the second half of the year 2008, price discounts up to 4.8% compared to the same period of the last year, those who are looking for a house up to 1 million dollars get much more for the money invested than in the past. According to the federal real estate office, foreclosure crisis in the USA has affected the most famous areas like California or Florida where some investors have purchased land in order to build luxury residential complexes, according to Forbes.

Those who want a house or an apartment in Europe are not very lucky actually. The decline of the dollar and the foreclosure crisis in the USA do not decrease the price of houses in Paris. For example, an apartment of 300 square meters in a residential luxury area can reach over 1 million dollars. In Costa Rica, at such a price one purchases properties of up to 5,000 meters, having marble flooring and Roman style columns.

Whereas in Chicago and Cape Town people can purchase many things with 1 million dollars, in London and San Francisco prices apparently do not decrease.

According to real estate representatives, properties sold at up to 10 million euro are quoted at the same level. They have stated that at such a price, top properties will always remain the same.

To continue with, according to Alan Greenspan, the foreclosure crisis in the USA, which triggers a financial crisis as well is considered by contemporary analysts and it will be considered by analysts of the future the toughest crisis after the Second World War. The former president of the American Central Bank (Fed) has declared in an editorial belonging to Financial Times that this crisis will end when the cost of the properties becomes stable and when losses and gains become effective, not prospective.

After the record in 2006, prices on the real estate market have collapsed. Since the summer of 2006, hundreds of thousands of houses, some of them threatened by foreclosure have been rented. Thus, offers on the real estate market have exceeded demand, with approximately 600,000 houses. Builders have been surprised at the prices decrease, as they have not been able to cancel projects that have not been finished. To those 600,000 houses, 200,000 more houses have been added.

The foreclosure crisis in the USA will attract many losses. The institutions that will be affected the most are the banks, lending companies that set up their strategy on long term, and that do not consider such considerable risks.

The problem, according to Greenspan, is that the USA do not own advanced logical and economic provision methods. Even though their current methods are competitive, they are extremely surprised at sudden changes in the American economy that can eventually lead to more and more foreclosed homes.