Can somebody explain please???

Discussion in 'Economy' started by Nathan, Aug 2, 2012.

  1. Nathan
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    Nathan Rookie

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    This may be a stupid question, but why are rising house prices a plus for the economy?

    Don't higher prices make it more difficult to sell houses? In other words, unless rising house prices are accompanied by a concomitant increase in income (and an increase in the consumer's willingness to spend), aren't higher prices detrimental to economic growth?
     
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  2. IGetItAlready
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    IGetItAlready BANNED

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    Higher property values result in increased economic stability for homeowners who tend to frown on the greatest investment of their lives dwindling in value until they owe more than they can ever expect to get out of the investment.

    Granted, those who can't afford a mortgage are even less able to do so but selling houses to those who can't afford them was a failed approach to buying off the poor in the first place.
     
  3. martybegan
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    martybegan Gold Member

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    It can be related to an increase in demand. When there are less houses on the market than the number of people who seriously want to buy a house, sellers tend to stick to thier offer price. Having lots of people want to buy houses is a sign of confidence in their ability to afford it, and generally shows good economic times. Rising prices also usually means house builders will build more houses, as they can make more profit when prices rise. This leads to more jobs.

    This isnt always true, but is why people relate rising housing costs with pluses for the economy.
     
  4. American Horse
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    American Horse AKA "Mustang"

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    Higher prices would be a sign of increasing demand and a signal that the market believes the bottom has been passed. When that reality is accepted builders will feel confident in building for the market and prospective home buyers who would engage a builder will feel safe in investing in a new home and that they won't make a poor investment.

    Home construction/housing production is the country's largest industry sector, or close to it.
     
  5. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    higher prices mean people are doing well enough to bid up the price of houses; this is a good sign that the economy is picking up.

    It also means prices are relatively low compared to expectations. Thus, homes are selling and so the home industry, which normally will leads a recovery, may be showing sign of an impending recovery.
     

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