The Link between Credit Growth and Real Estate Bubbles
February 12, 2025
General Motors (GM) was one of the most unexpected casualties in the subprime mortgage crisis. This was because of the fact that General Motors (GM) had nothing to do with the mortgage business. It was one of America’s and the world’s oldest motor companies. However, the crisis had many casualties which were not related to […]
How Rising Oil Prices Cause Inflation It is a fact of business that increases in the prices of raw materials increase the overall costs of doing business. This is simple common sense as the businesses use the inputs to process into finished products and hence, any rise in the input costs leads to overall increase […]
The role that the government played in causing the subprime mortgage crisis is highly debatable. However, the same cannot be said regarding the role performed by the so called government sponsored entities. The Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae) and Government National Mortgage Association (Ginnie Mae) are three […]
The strategy of quantitative easing is a new tool being used by Central Banks all over the world. Most big central banks like the Fed, Central Bank of England, European Central Bank and the Bank of Japan have been using this strategy extensively as of late. This tool has been used on such a grand […]
The Perils of Political Instability and Uncertainty If there is one thing that business leaders and entrepreneurs hate that is instability in the macro environment. Businesses operate according to forecasts and scenarios about the future that comprise surprises as well as certainties. However, as much as businesses factor in uncertainty, the one thing that wants […]
Real Estate markets are extremely complicated. The price movements in this market are usually slow and difficult to come by. A major factor behind this is the type of investors who put their money in the real estate markets. Therefore, an understanding of the real estate markets has to be rooted in an understanding of the underlying participants as well as their motives. We will have a look at these factors in this article:
The most important feature based on which we can distinguish real estate investors is their investment motive. All investors buy real estate. However, not all of them do for the same reasons. Let’s have a look at the three major categories of investors in the market.
Real estate investment is an old school investment game which only pays off in the long run. Most of these speculators are either people trying to make a quick buck by selling their phony “surefire real estate profit strategy” or people who have fallen prey to these con men and are actually trying these phony strategies in the market! This category of investors was hard to find just a few years ago. However, of late, they have become a lot more common.
The long term investor category can be further subdivided into two more categories. These categories are distinguished based on the degree of control they exert on the property in question.
Lastly, the type of real estate investors can also be distinguished based on the type of legal entity they are. Legal entity is important because it determines the amount of liability that a person has.
Real estate market, like the other markets, is therefore complicated. It has various investor groups, who have different motives and based on the competition and co-operation between them, the real estate prices are set.
Your email address will not be published. Required fields are marked *