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The Forecast in Real Estate Recession
By David Jackson of Carpediem Articles
The real estate industry in the United States boomed but the fanfare paused when things got shaken up come 2005. Housing bubble has happened as the downturn in the market affected the economy very much. The seller’s market that was a result of the boom grew during the time. New homes well sold very quickly and they had the power to play with prices of properties. Developers had a grand time and they started building some more houses to accommodate the demand. The inventories ballooned when the market conditions changed. Suddenly, buyers stopped buying. In this business, supply and demand is pegged based on the available inventory. Since sales slowed down, it took a longer time to sell the typical number of houses. More and more units remain unsold and are just lying around waiting for the next buyer, who almost always doesn’t come. Real estate investments, particularly on housing, have tremendously decreased. In California for instance, there is an abrupt decrease of 48.5% from 2007. This record has also broken every record in the last 20 years. Hopeful to recoup their capital, developers and sellers are forced to slash their prices if only to make the houses more attractive to buyers. Foreclosure is also at its record-breaking level as home prices of existing properties go down. Homeowners struggle with increased interest rates and decrease in the home values that result to negative equity. For many people who need to sell, they are selling at a loss but can’t do anything about it. In the Bay Area, there were a total of approximately 7,300 new and resale homes that got sold in August 2007. Come September 2008, there were only about 5,000. That is more than 30% decrease. Market is expected to collapse if some countermeasures and fix-ups are not implemented very soon. Many mortgage lenders have increased their interest rates – that is as good as saying they are refusing to lend money. Higher interest charges push the potential buyers away, so sellers are really in a twisted situation where they have so many inventories and less demand for them. Experts attribute the move of the banks to the current banking system situation – over-extended and under capitalized. Banks are in trouble for huge debts and the Federal debts too are in the same boat. There is not much capability to lend money to people who want to buy houses. Recession is feared to be up and coming as the slowdown on consumer spending peaks. People are becoming more and more conscious about their monthly expenditures. The economic crisis is something that will be felt by everyone – sellers and buyers. If things proceed without any concrete solutions in the works, people will continue to feel the whips. There is a call for a dramatic change within the next 10 years to prevent permanent economic downfall. Meantime, real estate foreclosures are a major issue as well as high interest rates that make it a more helpless situation for developers and sellers of real estate homes.
This intel first appeared on: http://carpediemarticles.com/realestate/
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