After the banking and real estate fiasco of the last few years, business is not as easy to conduct in either industry. In fact, loan limits can stifle real estate business. In years past, sub prime lending meant that people who would never be able to afford a balloon note were able to buy real estate. Needless to say, the loans matured and the bill wasn’t paid. Banks started trading bad debt, and the domino effect started.
When the bad debt of the last few years ran out of places to hide, much of the new construction, that was popping up at lightening speed, stopped. Suppliers went unpaid. Workers lost their jobs. Banks went under. As things have begun to right themselves, the banking and real estate businesses are taking heed from a hard lesson learned. That lesson is simple. Not everyone can afford to buy a house. Rentals, or income real estate, is probably not a bad business venture. For those real estate agents buying and selling homes, the banks are making it tougher to make the big sale.
Banks are currently balking at anything more than $200,000 worth of financing. Anything more than that amount is getting well over the average home owner’s budget. Banks are not going to set up crazy sub prime balloon notes this time around. That means the expensive real estate will probably be sitting vacant a little longer than many had hoped.