Housing Situation

I was sorting through mails and came across two shiny flyers. The kind made in glossy card stock paper from No. 1 sellers agents in the sought after area where we live – rather where we rent. Both flyers were screaming loud that they sold most of the homes for much more than the listed prices. Some prices were over 100 K or 150 K than the listed price. Some of them say cannot disclose how much more. The factor that got my attention was two words in green, in most of the transactions -  ALL CASH.

So who can buy a home for 1.5 Million in all cash? And why? How does this impact the economy? My simple knowledge about the US economy is that the financial institutions need to generate loans and revenue though interest to create a sustainable economy. Is that not true? What triggers the home pricing hike? Did a simple search for “United States Economy”. The following is a statement I found in one of the articles.

“A central feature of the U.S. economy is the economic freedom afforded to the private sector by allowing the private sector to make the majority of economic decisions in determining the direction and scale of what the U.S. economy produces. This is enhanced by relatively low levels of regulation and government involvement,^[as well as a court system that generally protects property rights and enforces contracts.”

Economic freedom has made a United States a highly sought after land for living from people all around the world. With the abundance of natural resources and opportunities, this country became home to millions of hardworking individuals who thought they could realize the American Dream and live happily ever after. It is a pity that at least three fourth of those who made this country home, cannot really afford to own a home for themselves. Just thinking a little more on this situation, what causes this? Is this governed by the law of supply and demand?

A recap of the law of supply and demand: “The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be.”

Personally I think US housing in some parts is governed by Surplus Money + Controller Demand + Opportunistic Greed, than the actual Supply and Demand in the market. Buyers with a lot of money from stock options or whatever, and out of country buyer who desperately wants to invest in the US are always willing to pay anything more than the listed price for a house. The hard working families with normal income pattern can only dream of a dream home forever.

Should there be some regulations in place? Should someone look at this situations? Or is this a situation created for a reason?