Will the real estate market recover in 2008, or keep falling? Why?

Question

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Answer 1

This question is based on a false assumption.

There is no national real estate market. There are only thousands of small local markets. I drove through a small college town in Texas yesterday that has a large number of apartments under construction everywhere because of a shortage of housing A month ago I was on the island of Maui and saw condos and houses under construction in several places on the island. I have heard of lots of vacant houses standing with no buyers in California, Florida and other places.

I think in some of those places where there are new homes sitting vacant and a record number of foreclosures it may be 2009 before the demand catches up with the existing supply.

In my area of North Texas it seems to be fairly balanced. Maybe a weak market in new homes, maybe a weak market in condos and in smaller homes, but a pretty balanced market in the middle range of prices.

Answer 2

The market will not recover, not until probably the end of 2009 or even 2010. The real estate market collapse has been a long time coming - everybody was profiting from the business boom, so even though most companies had underwriting guidelines and policies ( which supposedly lessened risk ) in place, the lender mentality became "let's make it work, no matter how", which is how we got into this mess. As an mortgage underwriter, I have seen borrowers with a 550 credit score obtain 100% financing, on a stated income or no doc loan. If an automated system approved the deal, it was a done deal, likewise if I declined it - somebody higher up would overturn my decision, and approve the loan. That mentality, and the preponderance of mortgage loans with the potential for negative amortization (the so called Option ARMS) or with an initial period of interest only, allowed many people who would not have otherwise qualified for a mortgage to obtain one. I've been saying for the past 10 years that it was a matter of time; and it's finally happened. The market decline will continue, as lenders and the investors buying the loans they generate tighten their guidelines, and borrowers continue to default on mortgage loans they never really qualified for. Only a select few, with decent credit, verified income, and a downpayment, will qualify, which means more builders out of business, and more massive layoffs in any of the industries that feed off the lender business (title companies, surveyors, appraisers). When the market does recover, it will be to the level that it was back in the early eighties, when I first got into the business and mortgage rates were 21%.

Answer 3

I think the recovery will be later than 2008. I believe that the market has not hit bottom yet and when it does it will remain flat for a period of time before the recovery takes place. We have record foreclosures and the Federal government is stepping in to stall foreclosures on a million homes that are in trouble. Stalling the foreclosures will help the ailing financial markets and slow the decline in home prices but will prolong the time to recover. US Governmental debt is moving upward towards 10 trillion. Interest expense is a growing percentage of the US budget while interest rates on treasuries have been historically low. There are some black clouds on the horizon for the US: if foreign governments stop buying our treasuries, inflation imported from China, immigration issue tightens the labor market, ongoing war costs add to the national debt and any related slow down in the economy will increase our borrowing rate. While there are always black clouds looming somewhere, I believe that these clouds are moving closer and the likelihood that we are hit by these storms is increasing. The real estate market could be a five year flat period or more if we hit an extended recession. The government's weapons for limiting a recession: lower interest rates, increase spending, and lower taxes have already been fired.

Answer 4

It will take more than 1 year to bring the real estate market back. It's not just mortgages that are causing problems. A mortgage interest freeze won't help with rising home owner's
insurance premiums, and real estate taxes, on over priced
assessments.
When you double the assessed value's, you double the taxes and double the insurance premiums.
Take this hit and then be told that your house value has declined thousands less than your purchase price.
If the real estate value is still close to the purchase price,
I might try to hang with all the increases. But if the value has slipped $ 50,000 or $ 100,000 . Foreclosure actually looks
to be the smartest way out. The market has far from recovered, millions of recent real estate buyers, may opt out
through for closure proceedings. Many mortgages are adding
over a $1,000 a month just for taxes and insurance.
Based on Americans income averages $35,000- $45,000
yearly. Home prices of $300,000 to $500,000 are impossible.
Our leaders in Washington don't get it. Freezing interest rates is only half of the problem.

Answer 5

It all depends on the overall economy and mortgage rates. We are slipping into a slight recession with rising gas prices and a sluggish job market. I think that is affecting the home sales along with the fact that in the past 2-3 years there was a huge housing inflation rate. That housing inflation is now bursting in many parts of the country and it is affecting home buyers everywhere. People are scared they might be paying too much for the home, especially when they are moving into a new city and their not familair with the prices in that area. There are nitch areas that are booming, areas that are steady and still some cheap homes available in pockets around the country. I think in 2008 it will take another 6 months before we start to sell some of those problem areas and like the stock market, what goes down will come back up. But it may just take a new President to get things back on track, or else we'll be heading for a train wreck.

Answer 6

NO. Expect a slow 10 year price recovery in the Southern California market. There are two reasons for this. The first reason is that housing is still priced too high for middle class income wage earners. Even Union plumbers & electricians can't afford to buy!

Secondly, the Baby Boomers are just now starting to retire. Even at the current real estate pricing, these early Baby Boomers have a lot of real estate equity and will be selling rather than buying. Over time, they will SELL real estate and SELL stock - not buy.

Baby Boomers have supported the California economy since enterering the work force now many will sell and move away from the smog, traffic, crowds and high cost of living.

The result will be more houses on the market at lower prices for a long while to come.

Answer 7

I have a Real Estate License in Illinois, and although our market is not as disrupted as maybe the south or west coasts, one factor that can predict the longevity of this correction is wages. Inflation on items such as gas and oil, have effected the American family in a way they had not anticipated. Sure there is talk of being Green now, but where were these readily made available products 6 years ago, when people had the money to spend? I believe if congress can negotiate a long term, of five years or more, suspended rate hike, people can begin a new budget and planning for their future. This could remedy the market in the spring of 2010, if big business can not make a needed sacrifice, I believe this will be a lingering market problem for the next decade.

Answer 8

Yes this whole sub-prime mess will be done by the END of 08 Look at the mortgage resets for the subprime mortgage market next year. Aug (07) 52 Billion Dollars Sep 58 Oct 55 Nov 52 Dec 58 Jan (08) 80 Feb 88 Mar 110!!! WOW Apr 92 May 72 June 75 July 50

Answer 9

That would really depend on what area of the US you are in. Some cities have not been affected in a major way, others slightly. It's sort of give and take.....ok we create a way to help SOME people to keep their home and we make it harder for ALL people to get in a home. Either way they are still setting people up for failure. Without money and good credit underwriters make guidelines for qualifying stricter, almost impossible. What happened to "The American Dream"? It's out the door just like Bush is about to be. The mortgage freeze Bush proposing probably won't help alot of people when compared with the rate of defaults on mortgages. I think the natiional market will recover right before summer of 2008, maybe even as soon as late March, mid April maybe. Best advice for 2007/2008 .......... you never know what the market will do, invest wisely, never buy a home on an ARM, put money down if you can and make sure you can afford the home you are purchasing.

Answer 10

I am a small business owner (retired Army) living in South Florida, the recovery of the real estate market depends on many economic factors. The wars in the middle east are the fuel in the fire and until they are put out, there will be no recovery. The interest rate must drop another .5% to allow current and new buyers affordable mortgage. During the real estate boom eager buyers were herded into the Slauter house like cattle by greedy speculaters backed by shady mortgage companies using creative financing. Now everyone is paying for their greed to include them. The market will adjust itself in the next year, and start a modest recovery 6 months after the presidential election resulting in a democratic president. Obama or Clinton will be the only ones capable of getting us there.

www.bahamasdreamhome.com