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Is The National Residential Real Estate Market Headed For A Depression In 2007 Is There Any Good News
t the beginning of 2006, Federal Reserve helped curb
the so named real estate inflation by raising the interest
“bubble” across the nation rate in 2006. Overall National
was leaking air. We read opposing business activity has increased
views by economists, whose in the past year, and
opinions graced the pages of unemployment is fairing well,
national media and were dependent remaining at 4.5 percent. New
upon which economic theory they jobs totaling 167,000 were added
followed. It was difficult to in December 2006. The gross
know whom to believe. It is now national product has not declined
2007, and we know in most areas and the national economy is in
the real estate market is very good shape.
considered to be in a recession.
So, what does this mean to the
A national economic recession sellers and buyers of residential
occurs when the gross national real estate? It means business is
product declines by five-to-ten back to normal, before the real
percent over a six-month period. estate “bubble” inflated so to
Residential real estate prices speak — with some roadblocks to
have dropped double digit percent navigate.
points since the beginning of
2006 and inventories of used Less Available Money
homes listed for sale doubled
between 2004 and 2005, then again First, all the money that was
between 2005 and 2006. being invested into real estate
during the boom has been diverted
The News Isn’t All Bad into other non-real estate
investment opportunities. This
Real estate is only a part of the means that money once invested in
gross national product, and the mortgage-backed securities is
diminishing. time securing a mortgage than
during the real estate boom, when
Additionally, large mortgage just about anyone with any type
lenders are receiving more of credit rating was approved.
federal oversight scrutiny for Less mortgage availability means
lending practices used during the less potential buyers for the
latest real estate boom. They home sellers, too.
continually raised the lending
limits to control the market (or Before looking for new
so a few of these lenders are residential real estate, secure
accused), making mortgage access your financing first. Not only
much too easy. Many of those, who are you then confident in looking
took loans at only 20 at property, but also you know
percent-to-nothing down (called exactly what you can afford.
leveraging), now are losing their
homes and defaulting on their For sellers, ensure your realtor
mortgages. Even if these owners asks potential buyers if they
could sell their homes, have secured financing. Those
afterwards, they would still owe that have, even if their offer is
much on the balance of the a bit lower, may be more
mortgage. They are being hit the attractive buyers than those who
hardest with default rates have not. You decide which offer
doubling in both 2005 and 2006, to accept. This is especially
and expected to continue important, if you are in a hurry
throughout 2007. This, too, has to close.
hit the mortgage lending industry
where it hurts the most — Prices at Practical Levels
profits.
During the real estate boom, home
Buyers will have a more difficult values rose by almost 500 percent
between 1990 and 2005. Now, they it is a great deal) — buyers are
are back to practical levels. more apt to be interested, when
they know they can afford it.
For sellers, who purchased their Sellers were in the lead
homes by leveraging, they may negotiating seat during the real
have to take a loss or wait out estate boom. They must accept
the current market for better that, though they still have
times. All sellers face a lot of negotiation power, they have
competition from other homeowners relinquished the lead seat to the
wishing to sell. Some creative buyers. This makes a realtor
staging of their property (inside invaluable to both sellers and
and out), as well as adding buyers, alike.
incentives to buyers, can make
their residential real estate for For the buyers, you will get much
sale stand out among the rest. better real estate deals now. You
Some Realtors have found success can take more time to decide and
placing the asking price right on make an offer than during the
the “for sale” sign. Others have boom. Secure your financing
taken advertising and marketing first, hire a realtor and enjoy
into the 21st century by creating the hunt.
specific web sites with a gallery
of interior and exterior photos 1 Ensure no valuables are in the
of the home1 . Many Realtors photos. You wish to attract
believe in promoting the home for potential buyers — not thieves.
sale through the media by giving
the asking price (especially when
About the Author:
John Harris is an expert researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more information please visit San Diego Real Estate
Read more articles by: J Harris
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