Dan Auito
03-02-2007, 01:30 AM
Prolific real estate Author, Robert Irwin wrote this article specifically for us here at www.magicbullets.com (http://www.magicbullets.com) Let's give Bob and big thank you gang! :praise:
DEEPER NOSEDIVE FOR REAL ESTATE?
By Robert Irwin
Is the residential real estate market headed for a deeper nosedive?
It’s easy to predict this, given the state of economic affairs in the country today.
New housing starts are down some 16 percent. Allen Greenspan talks about a recession and the stock market drops over 400 points. Foreclosure rates are double what they were last year. City after city around the country report increased home inventories, sluggish sales, and slumping prices.
It might seem that the only way to go from here is further down.
But, I’m not so sure.
I live near Los Angeles and the market around me is surprisingly strong. Oh certainly, in those areas where prices flew off the handle going up 20 percent and more each of the last two years, values are down. But, isn’t that to be expected? After all, with the historical average rate of appreciation close to 5 percent a year, in the last two those areas compressed 8 years and more of appreciation. It’s going to take them awhile to get back to reality.
And if you look closer at foreclosure rates, you’ll see that 70 percent or more of them come from subprime borrowers. Those are borrowers who lenders probably shouldn’t have made loans to in the first place. Is there any wonder that with the new nothing-down option-mortgages, the subprime borrowers are in trouble? Besides in terms of real numbers, foreclosure rates are only a tiny fraction of what they were during the last big real estate recession in the 1990s.
More disturbing is the economy. If one probably misinterpreted comment by the former federal reserve chief (Allen Greenspan later denied saying that the country was headed for recession), crashes the stock market, it means that Wall Street investors are nervous… and probably overextended. If a full-blown recession comes, it definitely would be hard on real estate.
On the other hand, my take on the market is optimistic. What many people forget is that there is still a shortage of good housing in most areas of the country. And mortgage rates remain relatively low. There are still lots of borrowers out there capable of buying.
While no one has a crystal ball, I suspect that barring an economic recession, many areas of the country will start seeing a modest real state recovery by year’s end. By next year we could be back to the average 5 percent appreciation rate. And doesn’t that look good from here?!
RobertIrwin.com
DEEPER NOSEDIVE FOR REAL ESTATE?
By Robert Irwin
Is the residential real estate market headed for a deeper nosedive?
It’s easy to predict this, given the state of economic affairs in the country today.
New housing starts are down some 16 percent. Allen Greenspan talks about a recession and the stock market drops over 400 points. Foreclosure rates are double what they were last year. City after city around the country report increased home inventories, sluggish sales, and slumping prices.
It might seem that the only way to go from here is further down.
But, I’m not so sure.
I live near Los Angeles and the market around me is surprisingly strong. Oh certainly, in those areas where prices flew off the handle going up 20 percent and more each of the last two years, values are down. But, isn’t that to be expected? After all, with the historical average rate of appreciation close to 5 percent a year, in the last two those areas compressed 8 years and more of appreciation. It’s going to take them awhile to get back to reality.
And if you look closer at foreclosure rates, you’ll see that 70 percent or more of them come from subprime borrowers. Those are borrowers who lenders probably shouldn’t have made loans to in the first place. Is there any wonder that with the new nothing-down option-mortgages, the subprime borrowers are in trouble? Besides in terms of real numbers, foreclosure rates are only a tiny fraction of what they were during the last big real estate recession in the 1990s.
More disturbing is the economy. If one probably misinterpreted comment by the former federal reserve chief (Allen Greenspan later denied saying that the country was headed for recession), crashes the stock market, it means that Wall Street investors are nervous… and probably overextended. If a full-blown recession comes, it definitely would be hard on real estate.
On the other hand, my take on the market is optimistic. What many people forget is that there is still a shortage of good housing in most areas of the country. And mortgage rates remain relatively low. There are still lots of borrowers out there capable of buying.
While no one has a crystal ball, I suspect that barring an economic recession, many areas of the country will start seeing a modest real state recovery by year’s end. By next year we could be back to the average 5 percent appreciation rate. And doesn’t that look good from here?!
RobertIrwin.com