Home » News » Facts on US housing market for investors: Be prepared for obstacles!

The United States housing market has been the talk of the town for several years and reasons. It is still the sector where people would like to invest their money and hold some property in their name. Problem is pointed from the part when there are buyers, but no sellers or house on sale. People are not willing to give away property even when price surge, house bubble, higher mortgage rate and house tax hit the market.

In the recent US market data by National Association of Realtors’ Pending Home Sales Index (PSHI), it has recorded its highest level of sale with 111 and in 2015’s June, it is just a percent down with 109.9 rounded off to 110.

Even after being one of the most lucrative markets, investors might have a problem in operating money in this sector.

6 main obstacles faced by an investor:

As real estate market is growing, there are equal numbers of unresolved issues that are coming up as hurdles faced by investors. Economists and analysts have identified 6 major problems in this sector.

  1. Surge in mortgage price

There has been a sudden hype of price made by Federal Reserve. If all the taxes and mortgage interest are considered, there has been a rise of almost 17% this year.

Almost 23% of the houses which are on a 30-year mortgage are “underwater.” This means the amount a person owns to the bank is more than the house price.

If this scenario continues, more than 22% of people will have to give up their dreams of buying a house in America as the mortgage rate will continue to bloom.

  1. Low income for keeping up with home prices

There is no increment in people’s earnings. Ratio of earning to spending or investing on a house is now completely distorted. There needs to be a down payment of minimum 3.4% and considering the rise in mortgage rate, applying for a higher amount of loan is also out of the option.

  1. Down payment amount is way too high

A person with a normal job and a fixed salary has to be involved in other loans too. Almost 39% of the target buyers from age 18 – 34 years are already in debt. As per renters, 42% of people are backing out from buying a home because they are not being able to gather the amount for down payment.

  1. Lack of sellers

Buying new property will cost a fortune and selling old property won’t fetch the money, considering the miscellaneous investment related to it. This is why they are avoiding getting into new property buying and houses which are already in market for sale are on hold. Last year as per real estate data, the bidding of 73% to sell a house has gone down to 60%, which is a drastic fall.

  1. Creditors are at a hype of taking advantage

After an economic meltdown in America’s housing market, banks and authorized organizations, creditors are now at the peak of business. They are lending money and are charging higher rates than banks. It is noted that, while banks are charging an interest of 4.4%, creditor’s interest can rise to 7% for the same amount of money and time.

  1. Investors inclined more towards suburbs

In 2015, there is a drop of 5% of investors in market from 20%. Economists believe, a surge of house values is making investors withdraw from market. Mostly, prime areas like Tampa, Vegas, Manhattan and New Jersey are being avoided. Instead of that, people are willing to invest in the suburbs or a bit sterile part of the country.

Foreign investors have always shown a keen interest in US’s Housing real estate. But due to the abstract manner of price surge, they are also withdrawing themselves from market. This is causing trouble to million or billion dollar properties. Those are not getting sold and are on hold which is creating a hurdle in proper functioning of circulating real estate money. There is a drop of 18% sale for mansions and villas.

Overview of past 2 years market obstacle

For the past 2 years, people have been facing these hurdles while investing in America’s housing real estate. In the following chart, get an idea of how many people are suffering from what major hurdles:

Causes Year 2014 (%) Year 2015 (%)
High mortgage 33 31
Less income/salary 24 23
Lack of down payment 53 54
Unable to pay debt 25 29
More credit rate 35 35


Presently, the US housing market is still under trance of these obstacles. This is why investors are prepared beforehand to deal with these problems. Considering all these, the question is will real estate market change for betterment over the coming years?