The Business Cycle and Buying a Home

Expansion and Recession 

When the economy is striving and many feel optimistic about their prospects for the future you will see increased spending. They are confident about their place in life and tend to purchase pricey things or shop more. They tend to buy new cars, eat out more and even look into buying houses.

Then for reasons usually beyond our control the economy begins to decrease and slow down. Causing businesses to lay off their employees and consumers are forced to become more aware of their spending. Instead of throwing it away on materialistic things many will then be trying to put extra money into a savings account. When this happens the economy will decelerates even more and if it continues it will have a recession.

The real estate market usually has a big decrease in sales. Most of their clients will now be homeowners who can no longer pay their mortgage or needing a larger home than their current one provide. Also you will find that people will be looking to relocate either to find new employment or a more affordable place to live. If companies have to cut their staff by half that means those people will have to either find another job in their current town or relocate which means they will have to rent or opt to buy a home. If they own their home they may sell it to put the funds towards purchasing in a different location.

In the business cycle of real estate everything is merely based around supply and/or demand. If there is no supply for home loans or real estate the economy is greatly effected.