I have been working on this article for about a month. It just keeps keeping larger, so will start with part 1. Real Estate futures and your home.
What are Real Estate Futures? (Per Investopedia) “Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.” Kinda hard to understand. Let’s look at it with a little more clarity. Real Estate is able to be “bet” on in the stock market. Someone has said the property in your area is going to be worth their investment in the future.
Stock investors are waiting for that big payoff down the road. Simpler definition:
- an agreement traded on an organized exchange to buy or sell assets, especially commodities or shares, at a fixed price but to be delivered and paid for later.
- They do not buy your house, the buy the future payoff of what your house will be worth.
So, if Bank A sells of a package of loans worth 30 million dollars that is what they are betting on. In 2008 when everyone lost their homes and defaulted on loans, the stocks plummeted because they were no longer worth that 30 million anymore. You could pick up million dollar houses on a two for one sale.
What does that do for your house? It crashes the value of the property. It may not be worth what you have paid for it. The home market took a hit in 2008, putting it into a buyers market. Meaning if you bought a 100,000 home in 2008 when the market recovered in 2015, you could have a home now worth 400,000. In 2017 it is now a seller’s market meaning, that home you bought for 100,000, you could potentially make 300,000 in profit.
I have been looking at homes since 2013. It does nothing but makes me mad when I am notified of a price change on a home I have saved. The house built in 1970 sitting empty for eight or nine years. You can see mold, break-ins, nothing remolded or fixed, worth 400,000. I personally find that home poisoned with greed. The bank that foreclosed on it left it sitting, waiting for a seller’s market.
There are no laws prohibiting this. So the bank could let it sit there and rot trying to make a profit on a foreclosed home. Now if I went in and bought that 400,000 home, fixed, remolded, and updated it, spending 200,000. I now have a 600,000 only valued at 400,000. This is saying nothing about the taxes. I have seen some built in 1970 homes not updated still assessed for 200,000. You are paying three to four-thousand dollars a year.
It is not that there is not enough housing on the market, it is there is not enough affordable housing. The job market is not equal to the housing market. It all goes back to the stocks people bought trying to make a profit. There are two things that should not be on the stock exchange, food and housing.