Isnt it insane that houses are sooo expensive??

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smartascii

I know that there are economists out there who will argue with me, but basically, it all comes down to Alan Greenspan. Mr. Greenspan was the chairman of the Federal Reserve Bank in the United States for many years.

In 2000 and 2001, the US economy went through a slowdown. This was largely due to the fact that technology stocks (i.e., Internet companies) were overvalued, meaning that those companies' stock values were much higher than their actual ability to produce profit.

Because this happened, people who had previously had a great deal of worth tied up in these stocks suddenly lost that money, and couldn't invest in other things or put that money into the economy in the way that they had before.

So Mr. Greespan made a decision. He decided that he should lower the interest rates that banks pay to borrow money from each other and from the government. This spilled over into the interest rates that people paid on loans from those banks, meaning that it suddenly became very cheap to borrow money. When this happens, the effects of that rate change aren't limited to the United States, since banks do business across international boudaries.

So since the money was suddenly cheap to borrow, that mean that people who previously couldn't have afforded to get a mortgage and buy a house now could, and people who could only afford to pay the mortgage on a small house now could afford a larger one. This drove up the demand for houses, and when demand goes up, prices go up, too.

This decision was made on purpose, because it affected the worth and liqudity of everyone who owned a home. If you bought a house in the mid 1990s for $100,000, that house grew in value and in 2004 was worth, perhaps, $150,000 or more. That meant that you had at least $50,000 of home equity, and you could go to a bank and borrow money against that value. And because those interest rates were low, people did borrow against their home equity to invest or buy things that they wanted, and that drove the economy forward.

So now, because of all of this, houses have become much more expensive than they used to be, and fewer people are able to afford them. Because of this, though, and a number of other complicated factors, housing prices in the US are dropping. No one can say for sure, but I would expect that house prices will fall in many markets for the next year or so, so if you're looking for your first house, wait awhile and see what happens.

Leonarda

Only 250-300?
The banks in Greece are corrupted.They cheat the poor and innocent people and then they throw them to the streets...
They need more to pay the loan, be sure..
But it is the fault of the people sometimes who know what the banks are, and get more and more...
The banks never lose...the people are in the street...
In other countries the interests are lower of the banks..Thats why people are more encouraged to buy house

Marcus P. Cato

While it's undeniable that the Greek real-estate market is overpriced, there are a few things I have to point out, in the interest of accuracy:

Your figure of 250,000 - 300,000 Euros for a house is correct for large, new houses in expensive districts. If you take the time to look at a real-estate agency's website, such as the one below, you will find that several houses are on sale for less than 100,000. Just as an example, I have spotted a 48 m2 apartment in Zografou, Athens sold for less than 75,000 Euros. Prices outside Athens tend to be even lower.

What it boils down to, is that people should buy accommodation that they can afford. Households with an income of 1,000 Euros per month have little business buying 300,000 Euro houses.

Edit:
It's an interesting point you raise. I would think that a 4-member household with 12,000 Euros annual income should be able to find affordable accommodation suitable to their needs in districts such as Drapetsona or Zefyri. Of course, the problem with that is that few people choose to live there, let alone invest in a house. You may want to ponder on what that implies about Greeks. Ultimately, however, it's just a question of people choosing to live beyond their means. This is what drives people to take loans at exorbitant rates, and fuels the real-estate bubble.

tj is cool

It is pretty bad in California as well.

Kicky

Don't tell me! I'm lucky enough to live in my own apartment, yet as it's only 54 sq.m. I was thinking about moving to a bigger one. You don't want to know how much I was asked!!!

i live in florida -- 157% inflation in the last 7 years. part of the problem is a huge bubble created by easy loans to property investors and the governments keep meddling to keep banks happy. if the governments back off the market will drop -- but the investment people and banks stand to lose.

on the upside -- rentals are relatively cheap and your energy bills are about 1/3 of what they are in a house.

*smile*

Yes it is! They're been increasing the prices so they can earn more money.

lcplyr7

Yes it is the same in the USA. I live in Florida and right now you would pay a fortune for a tiny house with no property

Yanda

Yes. The housing market is a nightmare and never seems to get better. I get really stressed when I see that program Location Location (a UK program) and there are first time buyers on there looking for property in London or wherever but they only have a small budget of Â£350,000! WHAT IS THAT ABOUT! I want to know what these people do for a living. My friend is a Doctor and her partner is a teacher and even THEY cannot afford to get on the ladder. What do the people on misleading programs like that DO for a living. Contract Killer?

Jedi squirrels

I got houses in Shanghai too, and I am living in Canada! Houses are sooo expensive EVRYWHERE! Even in India, Malaysia, Singapore and larger cities, so of course the occident is full of it too!
I did pay my houses cash for most and contract 10 years loans and repay them under a year, to avoid been eaten by the banks! This is the only way to save your money or else you end up slave of the banks for the remaining of your active life! But when houses cost around 300K for 150sqm its a little bit complicated...

Welcome in the modern version of slavery!!

ele

Yes the situation is really bad aspecially for students who study in cities far from home...In England it's te same thing though...I will be paying 400 pounds (590 euros) a month next year...

carmelo_sabato

hey Louisiana is wide open $150000 euros buys you 4 acres and 2000 sq feet brick home ! and Lot's of hunting and fishing !! and you will never run out of water!! due to 6 big rivers coming through !!

Tony Carboni

yes totally insane. Average prices in northern ireland rose by 50% last year. Maybe thats why in many countries people are content with renting.

Amirra

It's pretty ridiculous here too - Canada.

usourselvesandourcats

Yes it is. I am Turkish-American, and the case is the same both for Turkey and the US. Also the mortgage companies are effecting the stock market lately, and it is almost like an added pressure to the housing market in the US. The prices are cut, but still not enough to have everyone to get themselves a home. Everybody pays them off in 30 years... It is so sad, when you also add the interest back on, the price of the house becomes astronomical.

peter p

you think greece is bad, try coming to new york city!!!!!! :)

houses in greece might be expensive, but im sure you can find an apartment right outside of athens....ie; holargo, rafina...etc. for less than eur300K.

Felicia

Yes, im from Orange County, CA and it's almost impossible for my generation to buy homes. Hopefully it'll go down soon.

sexy babe

am now in egypt,, n the prices r even higher (n the salaries are a lot lower)

mark s

Yes it is very expensive to buy a house in the USA when I was 20 I remember my boss building a big brand new house in a very nice neighborhood for $ 63,000 it would cost 350,000 today 23 years later, its crazy pay has not kept up.

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