The Cost of Real Estate Market and Its Effect In terms of Consumer Credit

In the years of 2008-2009 when the chauvinism of housing exploded all over the country and the prices tumbled one could see more empty houses than people. This was not a good thing for a seller as the home values went down, but was beneficial for the buyers and renters as they had plenty of options to choose from.

Since then a decade passed and things went uphill for the high as the demand for residential houses increased in the cities and there were not enough out there to meet the demand.

But with buyers with a good credit score, it was adjustable. However, for renters, it was tough as the low premium houses were at a premium cost.  To know the consequences of increasing prices of housing on the credit of a consumer you could try here.

Less Disposable Income

In general, a house must not price beyond 1/3 of the buyer’s income. But Americans end up spending fifty per cent of their income which leaves them with less disposable income. And in a consumer-based economy,  it is a real problem.


The Roommate Dilemma

The best solution one can think of to cope up with the housing prices is to add roommates. But it comes with its pros and cons. Though shared rooms are more affordable when it comes to a personal place that can be a bit challenging. And for the homeowners whose income is based on renting, their finance may get wrecked when the renter leaves.  The financial risk associated with this affect personal credit too.

Minimal savings

Increasing housing cost means low savings for emergencies, big purchases and even for pleasures. This can lead to bad credit habit of using a credit card for purchases as there are low savings.  Bad credit leads to lower credit limits and a higher rate of interest. They easily max out a card and this affects their credit score further.

Borrowing to live

 With high costs of housing, people spend too much on their housing ends up borrowing to live. They use their gas cards, store cards like cards offered by Walmart and other credit cards to cover their daily expenses and at the end of the month, the user is unable to make the minimum payment.  This leads to rising credit balance and a bad credit score.