Couple of years ago many people were complaining about the house prices being too high for many people to afford to buy their own home. Now the house prices have come down, you wonder where are all those people who supposedly wanted to buy their home but could not afford it because of the high prices. Governments may want the house prices to come down as well but the economic effect of that is quite considerable. As the house prices go up, homeowners get comfortable on spending their presumed wealth. On the other hand how could anyone expect a homeowner spend money easily when his wealth is going down everyday?
Buying a home requires certain set of mind. You need to want to own your home and start building wealth. Unfortunately, some people will not buy homes no matter how cheap the prices are. Any incentives will work for people who would have bought their home at some stage. It may not be clear from outset but recovery starts with housing and employment pick up. People with good income feel good about themselves and have the money and motivation to spend. When the house prices start going up, people feel good about their financial position and spend comfortably for their homes, getting repairs, renovations done and improve their property, buy sofas, white goods, carpets.
If the house prices are falling, all they will do is keep postponing that repairs and kitchen upgrade. Local tradesmen will not get work and will not spend either. Politicians who were complaining about affordability of houses in their neighbourhood have got the affordable prices now. Let us see if those people who were left out during property boom take this chance of buying homes at bargain prices and great mortgage rates. Politicians have to mind the damages they could cause to this fragile housing market. Unnecessary regulations and interventions should be avoided.
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