Predicting The Real Estate Market Turnaround
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?
This scenario is something everyone knows. Even if you do not own a home, the fear of bank failures has certainly come to your attention. The past is done and nothing can be done about it. Ah, but what about the future. Is the bottom of the market near?
Pure logic would suggest we must be getting close. We have been in a spiraling decline for a good two and a half years. How much farther can it possibly go? Alas, there are factors coming into play that make the future murky at best.
The situation is obvious. Homes have dropped in value to the point where there are plenty of steals to be had. So, why are vast numbers of buyers still on the sidelines? Maybe it is because they simply cannot get in the game.
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.
The entire situation would be humorous if it was not causing so much pain. The banks are in trouble because they gave out bad loans. Now they are under such stress that they either do not have money to lend or are scared to do so.
This catch 22 situation is really only just beginning to play out. While the Federal Reserve has taken aggressive action to prop up some banks and flip others, it is clear that the really bad stuff has only started to occur.
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.
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.
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.
You have to have money to buy a home. With money scarce, the real estate market is not even close to hitting rock bottom. Until the banks start lending again, the market will continue to have problems.
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