Will 2009 Be Another Bad Real Estate Year?
Author: HalJames Total views: 16 Word Count: 470
Every day seems to dawn with some new bad information regarding the state of real estate across the nation. From values in the tank to record foreclosures, things are just about as ugly as anyone could have imagined.
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?
If one focuses just on the real estate market, a turn around seem inevitable by early 2009. Of course, the real estate market does not just sit in isolation. It is part of the overall economy, which means additional factors have to be taken into account.
There is one factor that is flashing a major red light for the real estate market. It is the banking industry. The problems surrounding mortgage lenders have been very bad, but have really only just begun.
It is rather ironic. The problems of the banking industry are related directly to the problems surrounding subprime mortgages. This has resulted in banks failing or under severe stress, which means they cannot loan money to buy homes now.
The banking problems have been pretty bad so far. Unfortunately, the worst is definitely yet to come. This is why you see the Federal Reserve taking actions that it did not do even in the Great Depression. Yes, it is that bad.
While there has been a lot of focus on the subprime loans as the cause of this mess, such an explanation is too simple. There were plenty of other loans that were bad as well. Stated income loans, known as liar loans, are now failing.
Most banks cannot afford to take a second big hit on bad loans. With the slowing economy and liar loans going bad, that is exactly what is starting to happen. This and next year should be an ugly one for banks.
How bad are things? So far, most bank failures have been limited to small regional banks. Now, however, it is expected that at least one huge bank used by millions is going to fail by the end of the first quarter of 2009. Nobody knows the name.
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.
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