Everyone knew the real estate market would pull back from the astronomical highs earlier this decade, but nobody suspected this. Given the scorched earth that is the real estate market, can we finally expect things to turn around?
Of course, you already know most of this. The question for many people in the real estate market or considering getting into it is whether we are at the point where things will start to turn around. Put another way, have we found the bottom of the market?
After nearly three years of dropping prices and bad news, one would think the real estate market has to be getting close the bottom. After all, buyers are going to jump in soon given the good deals out there. Ah, but what if they cannot?
The fundamentals of the real estate market suggest buyers should be lining up to get some good deals. Home values have dropped tremendously and those buying now can expect to see sizeable appreciation gains eventually. Ah, but there is another factor.
While the real estate market seems primed to turn around, there is another factor that is putting the breaks on it. The credit crunch is the fundamental problem and one that is expected to get worse in the next year or two.
This problem is much like a dog chasing its tail. The banks issues poor mortgages that have come back to haunt them. Now they are in financial duress. Even those that have money to lend are hesitant to do so having been burned so bad.
While it might appear the worst is over, the truth is things have only begun to crumble in the banking industry. The Federal Reserve has taken unheard of proactive action to keep things under control, but it can only do so much.
Subprime loans often get the blame for the current mess. They were part of the problem, but now things are worse. The infamous liar loan, also known as a stated income loan, is starting to rear its ugly head. Yes, the loans are defaulting in mass.
Another wave of defaulting loans are going to sink a lot of banks. Throw in a slowing economy and inflation and we have a huge mess coming. There is no light at the end of the tunnel until late 2009 at the earliest.
It is getting so bad that now big banks are going to start failing. A warning has allegedly been given to banks to prepare their PR departments for the fact big banks will start failing over the next 18 months. That is scary.
Ultimately, the real estate market will not hit bottom until the lending industry does. The real estate needs mortgages for transactions to occur. As long as banks are hesitant and money is tight, the bottom of the real estate market is no where to be seen.
About the Author:
Learn how to sell your home quick as a FSBO seller by reading the articles of Hal James at FSBOAmerica.org.
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