Next Real Estate Boom Not Till 2020

San Francisco, CAA boom in the majority of the nation’s real estate markets won’t develop again until at least sometime after 2020, according to the consensus of opinion of Housing Predictor analysts.

The credit crunch, which was started by a fuselage of new creative financing products, including aggressive adjustable rate subprime mortgages and specially designed loans for investors will have a lingering impact on the majority of housing markets in the country for a number of years.Atlanta, Georgia

The credit crisis has swept through financial markets worldwide, triggering a fall in stock prices estimated to be more than $900-trillion. The crisis has had a devastating impact in the over-whelming majority of housing markets in the U.S. and has made its way into the overall economy. Additional increases in the cost of oil and commodities have also caused gasoline and grocery prices to rise.

Perspective of the Crisis

Historically, major real estate booms are always followed by busts. Nearly all have been caused by Detroit, Michiganartificial triggers. In 1989, the U.S. Savings and Loan Fraud Scandal was caused by an onslaught of unregulated Savings and Loans providing home mortgages with so-called dirty second mortgages, which were often known about by lending agents, but rarely officially disclosed to the institutions that made the loans.

A series of additional inside lending frauds and phony schemes contributed to the crisis, including falsified appraisals.

In the early 1970’s a real estate bust in many of the nation’s markets developed over similar schemes. Near record high interest rates caused hundreds of thousands of home owners to lose their homes and other property in foreclosure.

Similar but Dissimilar to Great Depression

However, there is little, if any, similarity to the current crisis except when compared to the real estate crisis that developed during the Great Depression. All financial crises in the U.S. have had their own identity and origins, and have developed or worsened over a number of years.

At the height of the Great Depression unemployment was said to be nearly 25%, but more people depended on income from employers in the 1930’s than in the U.S. these days. Nearly a third of the American work force now works out of their homes and a large percentage is self-employed, being less dependent on others for income. Could we be headed for an emotional depression since housing prices are falling so much?

Not just Low Mortgage Rates

Mortgage interest rates have had a large impact on the nation’s real estate markets historically, but not as severe as some might think. Over almost the past 20 years the Fed has kept interest rates at near historic lows until raising them about two years ago.

The artificial inflation that developed during the real estate boom was not caused by lowered interest rates, analysts agree. It developed as a by-product of mortgage companies and lenders that wanted to make as many loans as possible to anyone that could sign their name to sell the mortgages on Wall Street in order to make higher profits.

Real estate booms have always run in cycles, historically in 7 to 10 year turns. But the fabric of the nation’s real estate markets like homes themselves are always changing and it will take at least another dozen years to settle the dust.

It has always taken a number of years for real estate cycles to run their course and return to better times of prosperity, which is why the average home in America has seen appreciation at modest 2 to 5 percent increases annually.

The boom days are long over, but they’ll return some day in another fashion.

In the meantime, most Americans will stay in their homes and enjoy what they bought, part of the American dream at least for the time being, except of course the millions about to be foreclosed.

Leave a comment

Your email address will not be published. Required fields are marked *