What scenario will we face if house prices plummet?

Sudden rises and falls in house prices will have a very negative impact on society and the economy. House prices have soared some time ago, and many ordinary people have become increasingly unable to afford houses. There have been complaints in the society. And the wealth of people with multiple houses will expand more and more, causing serious social polarization.

If the sharp rise in house prices will cause a series of well-known problems, what will happen once the house prices plummet?

In the 1990s, housing prices in Japan remained high. Buying an apartment in Tokyo is equivalent to buying an apartment in Beijing for today’s Chinese people. Many people rent, and many young people rent. I can't afford a house and live in an Internet cafe. On the eve of the house price collapse, people were still convinced that house prices would continue to rise. Finally, once house prices started to fall, they couldn't stop. Of course, this is related to Japan's national policy. It can be said that Japan's housing price bubble was popped by the government. They think this is not necessarily a bad thing. In the end, Japanese housing prices fell all the way to 20 years ago.

The Great Depression in the United States, like the collapse of the real estate bubble, in the last century, caused many people to lose their jobs. The collective social panic turned many big cities into empty cities. Under such circumstances, Roosevelt had no choice but to persuade the people to hold on. Farmers couldn't sell their crops, milk was poured into rivers, banks cut off loans, and a large number of depositors began to withdraw money from banks, causing the bank's capital chain to break and shaking the entire U.S. economic development.

Once housing prices collapse, they will definitely fall into infinite panic. A large amount of assets cannot be recovered, and many people are discouraged about life. The real estate industry also has a great impact on other industries. The entire social capital chain Unhealthy development will have an impact on all walks of life. This is not a reshuffle between the poor and the rich, but a silent economic war. The rich will remain rich, and the poor will always be injured.

And if house prices really plummet, the first to suffer losses will be highly leveraged lenders. When house prices fall beyond the mortgage ratio stipulated by the bank, the bank will require the lender to repay the loan in advance or increase the mortgage. If the loan cannot be repaid or the mortgage is increased, the bank will sue the court to conduct a frozen auction of the property.

This will then trigger financial system risks. Banks now have tens of trillions of personal mortgage loans. If house prices fall, the value of the house will shrink, and there will be the risk of default by many highly leveraged borrowers who cannot repay. If the lender lacks solvency, then this risk will eventually be passed on. Go to the bank.

A sharp drop in housing prices will trigger a drop in land auction prices, reduce local land fiscal revenue, and make life difficult.

The real estate industry is one of the pillar industries of the national economy. It involves many industries. If housing prices fall sharply, the prices of corresponding upstream materials will also fall, which may have a great impact on related industries and further affect to other industries, which is not conducive to the stable development of the economy. Therefore, the sharp rise and fall in housing prices are not in line with the needs of the country. Only a stable and healthy real estate industry meets the expectations of the public.

In fact, the plummeting housing prices have had a huge impact on our lives.

For example, if the real estate developed cannot be sold at a high price, and people feel that house prices are going to fall, no one will buy a house. At this time, the houses in the hands of developers cannot be sold, which is more distressing than selling at a reduced price. As housing prices plummet and houses become difficult to sell, developers will go bankrupt or reshuffle in large numbers. At the same time, institutions that lend money to developers will also be greatly affected, and bad debts will rise.

Secondly, once real estate declines, its upstream and downstream industries will definitely face a large number of bankruptcies. Most of these industries are labor-intensive, and the service industries corresponding to these enterprises are also increasingly declining. If a large-scale unemployment wave occurs, the pressure on the job market will be very high, people's wages will decrease, it will become harder and harder to earn money, and consumption will correspondingly decrease, affecting other industries and putting the entire economy into a vicious cycle.

Finally, for us ordinary people, it is getting harder and harder to earn money, and those who repay mortgages may face huge repayment pressure. As money becomes increasingly difficult to earn, a large number of wealthy people will choose to immigrate, and a lot of funds will be withdrawn, causing money panic and many people racking their brains for money. It may even cause instability.

So in order to maintain economic stability, real estate must maintain healthy and stable development and establish a long-term mechanism.

First, people no longer invest money in real estate and will look for other ways to increase funds and assets. For example, increase daily consumer spending, travel, fitness, health care, social interaction, finance, insurance, self-employment, commerce, service industry, etc. The whole society becomes alive and popular. For the country, after currency comes out of the bank, it will go through layers of economic activities and various economic circulation links, resulting in an increase in value, an increase in the total economic volume, and an increase in GDP. Finally, it will flow back to the bank in the form of deposits and profits. Authentic evidence functions as currency. Unlike now, when you leave the bank, before you gain popularity, it flows back to the bank through real estate. It's a bit like the turnover rate of the stock market.

Second, the construction industry and its related industries that rely on real estate to make a living will, after transformation, turn their attention to social infrastructure construction, such as roads, railways, water conservancy, sports and fitness facilities and other projects .

Special architectural projects will be developed, such as green residences, tourist facilities, and places for communication and exchange. They will no longer be mechanical cement piles, but will improve the quality, level and concept of construction and create high-quality buildings. Survive the fittest and promote the advancement of construction engineering technology and concepts.

Third, as we all know, a large amount of resources will flow back to other sectors of the social economy and promote the overall healthy development of the economy. Industrial manufacturing, consumer goods manufacturing, service industry, commerce, transportation industry, entertainment industry, education, and other industries will receive the funds and resources needed for development, especially human resources. Take the current chaos in the education sector for example. If there were enough resources, teachers would teach with peace of mind, improve teaching quality, and social education resources would be balanced, who would choose a school again? Will there still be large classes of 80 or 90 people? Parents will not be burdened by too much homework or full of resentment, and there will not be many conflicts today.

The best result for us is that the economy should not be so dependent on real estate, and truly rely on its own consumption like many countries do. In this way, banks and the government will not be afraid if house prices fall. The economy won't collapse either. If we can make the economy mainly rely on our own consumption, and the consumption structure is very reasonable and balanced, then housing prices will naturally drop to a reasonable range.