Dealing with Economic Externalities in the Real Estate Industry Essay

Dealing with Economic Externalities in the Real Estate Industry. Letter address to a mayor - Essay ExampleOne of the most important out-of-doority can be found in the mortgage subsector. In the lodgement industry, an externality called a positional externality has led to products being very expensive. Positional externalities happen when the individual using the product or the service indicate to one-up each other. This is something that has been witnessed in the real estate industry for a languish time. As Grant (37) says, externalities affect all categories of land use and this is something that must be considered in a more than modern and serious manner. While this kind of an economic externality has affected the industry in a long time, the effectuate have been felt the most in recent time. In fact, economic externalities in the mortgage subsector were highly associated with the recent economic recession in the unite States. Increased availability of mortgage service has l ed to most people affording to buy their own homes through mortgage financing. While increased home possession is important and necessary for the growth of the economy, it can lead to dire repercussions when done in the wrong way. As the availability of mortgage financing increased and more people were now looking for homes to buy, the be of homes increased in a very fast rate that exceeded the market growth and inflations rates. This sudden hiking of the cost of owning a home happened so fast that at some time, the market started imploding. At this point, umpteen individuals could who had taken loan could no longer to be able to hold over their mortgage repayments and this unfortunately led to foreclosure of their homes. They could also not be able to sell off the homes at a cost high enough to pay the original costs of the homes. In this way, mortgage financing can be seen as having a great external cost to most individuals who would otherwise be able to buy their own homes wi thout having to depend on mortgage financiers. A closer analysis reveals that increasingly availability of rarely controlled mortgages have two types of external costs to the economy. First, it makes homes unfairly expensive for would-be home owners. Secondly, it leads to the crunching of the real estate market making it impossible for individual who had bought their homes at exceedingly high costs to be able to recover their costs by selling their homes. Need for control The mortgage subsector has been left uncontrolled and unregulated for a very long time. This has led to the participators in the industry to manipulate in a way that is less professional and also in a way that has led to many individuals having to lose a lot of money through a mortgage industry that is operated in a racket manner of operation. Most mortgage ruler laws are archaic and are not able to meet the needs of the modern mortgage market. Regulating the industry will be important for protect the many people who will definitely otherwise be affected by the poorly managed mortgage industry. Regulation in the industry should be accommodate towards ensuring that mortgage providers are painstaking and professional in the way they offer this product. Of essence will be to ensure that the mortgage providers do not operate in a way that will negatively affect their customers. The government should come up with a framework to guarantee that the mortgage providers are careful in the way they provide the product in terms of ensuring that they serve customers who are ready and capable to repay the mortgage. This will reduce or quench the number of home