Residential Housing Essay

KB Home, one of the major living accommodations companies in the market consec wander a narration telling the public that they do not see living accommodations sphere to alter by this category. Number of lodgment companies has been acquiring great hand popes by the eradicate of 2005 as available income of consumers decs as the effect of lowering fine-tune of per capita income in the economy. correspond to the President and Chief Executive military officer of KB Home, Jeffrey Mezger, they cod suffered to a amazing loss of nearly $10 per role during the first quarter of 2007 (Steverman 1). Deutsche Banks economists, Peter Hopper, tell that the living accommodations fudge factor works sluggishly just exchangeable a slow-motion train wreck which made worsened the housing sphere of influence of the economy. Moreover, the tell loss of KB Home worse than what they check expected. Analysts expects around $7 loss per share which is very far from the $10 per share loss accounted last quarter. Therefore, with the and worsening of the trite exp block offitures in the dribble market, this only means that on that point result be no improvement in the coming first quarter of 2008. To make the situation worse, there has been a statement in the market regarding the bankruptcy of comprehensive which supplies loans and mortgages worth 2 million and 9 million respectively. Countrywide suffered from 25 percent losses as of January 8 of this year. Meaning, there would be a paucity on the supply of loan and mortgages in the fiscal market just in reference Countrywide is really approaching to bankruptcy.Moreover, the shortage of supply of loans and mortgages in the economy get out only worsen the purchasing condition of the consumers, giving way for a further deterioration of demand to housing industriousness. maven possible reason behind the ruction in the housing application would be the ingurgitate of homes in the market creating a pressu re for its prices to decline. By the term price train of housing wholes excoriations to decline, profitability of housing companies begins to deteriorate giving way for experiencing a low reverse on coronation in the next quarter.Driven by speculation, investors will start to pull out their stocks in the housing sector causation stock prices to turn drink down. In this regard, the tie-up between the glut of housing unit in the market with the deterioration of stock prices is already established. Moreover, it is not only the excess of housing units in the market that ca utilise the imbalance of the housing sector. The growing challenger likewise adds up to the growth of the problem.At the end of the day, market analysts still believes that housing sector will not recover this year based from the current degree of losses that housing companies and pecuniary institutions had experienced on the last quarter of 2007.Analysis It is on-key that the turmoil in the housing sec tor started during the last quarter of 2005 when consumers have last available income. During then, consumers spent more in the housing market invokeing the housing companies to throw more house units next quarter. By the start of the first quarter of 2006, per capita income of consumers starts to decline giving them a limited disposable income for housing sector. At this point, the housing industry experienced oversupply of housing units since companies did not anticipate the deterioration of consumers disposable income.The said oversupply caused the price take aim of the housing companies to decline causing the return on investment to depreciate which posterior on forced stock toter to withdraw their stocks in the market. The increasing competition in the housing sector also add up to the lowering down of housing unit prices since companies in this industry starts to compete each other done price competition. Meaning, housing companies tries to lower down the prices of the ir home units in order to attract more customers. The negative effects of eh oversupply of housing units will not be that severe if there is only adequate number of fiscal institutions that will exit loans and mortgages to uplift the purchasing power of the consumers, therefore, alter the demand on the housing industry. unless the problem now would be, even financial lenders is also having a hard snip providing loans and mortgages due to the low income level of consumers in the market which imposes the threat of bankruptcy to the financial lenders. It would be best if the government would start making action by offer low interest rate on credit. The federal bank must structuralize a special credit scheme for housing sector customers, e.g. low interest rate on borrowing or durable payment period, in order to authorise the problem of over supply on the said industry. Another way by which the government could solve this instability of housing sector would be to provide financia l aids to Countrywide which, as what have already pointed out during the first weaken of the paper, plays a major role in uplifting the purchasing power of consumers though provision of loans and mortgages that can be used in purchasing housing units. The said government aid may be in the form of monetary of fiscalMoreover, the government could also increase the enlist rate of the workers in the economy in order to improve the current level of disposable incomes of consumers in the market. By the time the disposable income of consumers increase, they will now have enough money to purchase housing units which will solve the problem regarding the oversupply of home units.Works CitedSteverman, Ben Housing A Fresh Jolt of Bad News. 8 January 2008. Business Week. 11 February 2008 .