Question

How can a poor housing market put home buyers in a financially unstable position

Answer 1

C. Houses are valued lower than their purchase prices, so the home equity decreases.

Step-by-step explanation:

Some people invest in real estate in order to increase their income by appreciating real estate over time. This can happen if the housing market remains healthy. However, in situations of crisis in the housing market, the price of real estate tends to decrease. Thus, it may happen that the value of the property is below the value that the investor used to buy it. Consequently, the investor's net partition will be less than before the purchase, because if he sells the property, he will have a smaller amount than before buying it.

Answer 2

Below are the choices:

A. Changing property values means it’s easier to find homes with low rental costs.
B. When the home value decreases, property taxes and insurance costs increase.
C. Houses are valued lower than their purchase prices, so the home equity decreases.
D. Home buyers lose all tax benefits and tax incentives when the housing market goes down.
E. Mortgage payments can increase even though the home value decreases.

The answer is B.