The real estate bottomMarch 9, 2008
The real estate bottom is so far in the future it’s not even worth attempting a prediction. Real estate is not a liquid investment. Selling a property is time consuming, energy draining and expensive. Most people can not afford to buy anything without a mortgage, most people require the assistance of an agent, most people live in the only property they own, most people simply do not bounce around too often.
In general, this will always result in a real estate market that lags the general economy. Thus, anyone who accepts the preceding statement as reality should easily recognize the ridiculousness of predicting a real estate bottom when we haven’t even experienced the recession yet! Television news is almost always about someone else and people have difficulty recognizing when they are the subjects of a story. It’s one thing for other people to be suffering from a real estate collapse, but surely that won’t happen in my neighborhood. People have been bred by the financial industrial complex since childhood to believe the family home will always be their best investment. Re-educating millions of Americans is not a simple task.
The banks don’t have a clue what’s going on, and these insignificant write offs we have witnessed to date are just a fraction of what is to come. Bernanke is now even recommending that banks reduce mortgage principles to restore owner equity and give people an incentive to remain in their house. He would not be recommending such a drastic plan unless the alternative is much worse. This crisis will not be cleared in a few months, perhaps not even a few years. No related posts.
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There are some advantages to these costs, the real estate market has historically been a much more stable market than others in which day trading and hedge fund algorithmic transactions often cause excessive volatility. But it also means people will only be able to gauge true market valuations when they (or their neighbors) list a house for sale… how often does that happen? Every 5 years? 10 years? 15 years? It simply takes time for people to recognize that even real estate markets can fluctuate on the down side.
When you take into consideration the shear magnitude of this bubble, the largest credit bubble in American history, you must sober your hopes for a shallow recession. When home owners take interest only adjustable rate mortgages and have zero equity, why would they struggle to make increasing payments? As equity disappears, people all over America will be walking away from their mortgage in their millions, often leaving behind dilapidated properties that not only allow banks to recover nothing, but incur extra costs to dismantle the unsafe building.
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Really, many people believe real estate business is a golden mine. To survive for one and half decade (like we in Royal LePage Toronto did) you have to be really “in”. It’s not only about lectures “realtor in two days” and manuals like “real estate millionare”. You have to understand market, you have to see what’s going on, you have to study it constantly. There is always opportunity for profit, you just have to be on the right place in the right time! Then it’s possible to be a good realtor, but it’s a very hard job…