American Foreclosure Symptoms Around the World

Posted on October 24th, 2008 by saman

Real estate speculations and overestimations of properties have led to their low prices in the USA, scenario that is possible in other countries of the world as well. American economy has faced difficult moments. Properties are cheaper and there are fewer transactions. The causes are speculative transactions and credits for overestimated properties.

David Segrest, member of the National Association of Realtors (NAR-Association of real estate brokers in the USA), where he is a lecturer for the real estate agents training in Europe, in order to get the status of Certified International Properties Specialist, and NAR ambassador for the relationship with Argentina, speaks about the reason of American foreclosures.

He also speaks about foreclosure as far as other nations of the world are concerned. Even if he has not said anything precise, it is well known that in other countries, as well, there are speculative transactions and properties are overestimated.

In the USA, properties prices have decreased for the last months. You may wonder what the causes of this phenomenon are. We all have to understand that the USA is not a single market. Each area has its specific market. Besides, there have been many areas during the last three – four years, and in the largest areas, prices have increased with 30-40% per year.

Once, people started to speculate in the area of foreclosed homes and they used to buy any type of property, regardless the price, as they knew that in a year time they could sell it for tons of money.

This prices boom has not reflected reality. Eventually, on these markets properties prices have decreased at their real value. In Miami, Florida, there have been wonderful apartments not far from the ocean.

Many investors in South America and Europe started to buy properties in the pre-building phase, as they knew that the project would finish in two – three years. After that, they used to resell the property, when its price increased, even if it was not ready yet.

Most of these properties were built at the beginning of this year, people had contracts for apartments at prices between 500.000 and 3-4 millions dollars, and they did not have any money to buy them all. Therefore, there were plenty of properties, but there was shortage of customers taking into consideration their ridiculous prices.

If we consider markets like California, prices decreased with 3-4%. In the South of Florida, prices decreased with 15%. In many cases prices decrease was not important at all, but people stopped selling because prices were constant.

You may wonder if banks have been affected negatively by foreclosures. Real estate loans department has been affected, but the situation has been quite different. People who have been considered unwilling to pay their debts to credit companies have been so desperate to get a home, that they have been willing to accept a credit at a higher interest than the usual one. Most of them have not known specific details and have bought houses whose value has been insignificant. These are just a few causes of foreclosure, which is a terrible phenomenon of our times.