Real Estate- The Foundation of the American Economy : What’s in Store?

The slide began on 2007.  Prices were  rising, inventories were low and interest rates were low. The market was hot and real estate was the primary wealth building tool for Americans. But the slide was already beginning. A closer look at transaction reports would have made industry experts realize that there had already started a fundamental change in the markets. Most consumers and most real estate experts did not see the changes until it was too late. I’m sure there were signs but I didn’t see them. Credit has dried up and problems in the real estate industry still dominate the headlines.

Now , as we head into 2010, if real estate is to remain the foundation of the American economy, what needs to be done and who needs to do it?

The first thing is to get the blame out-of-the-way. We always need to place blame before we can move on.

There is plenty of blame to go around as to why the collapse occurred at all. Lenders, consumers, appraisers and the business cycle have all been blamed. And don’t forget the media, which loves to make everything seem worse than it is.  Its time to forget about who to blame and start paying attention to moving forward. 2010 is shaping up to be the year that the real estate industry  must  get back on course, for the good of our national economy.

Moving forward, the most widely publicised and brightest star in the real estate industry is, of course, the First Time Buyer Tax Credit, which we all know has been extended and expanded ( see previous blogs ).  Along with the tax credit providing an  unbelievable lift to the markets, I think consumer confidence needs to come back and it slowly will. There is ALWAYS a need for housing. There ALWAYS will be a need for housing.  Consumer confidence will return  and I think there are many signs that it already has begun to bounce back. The tax credit helps, but the simple fact that homeownership has been a part of the American Dream is what always helps to bring real estate back. This has all happened before and will again!

The benefits of homeownership are so great in this country that eventually the consumers will push the market back to where it should be.  One of the criticisms of our government, in regard to the collapse, was that they have made it too easy to buy a home.  But the reality of the situation, as every Econ 101 student knows, is that markets are cyclical. There will always be ups and downs. How high and for how long, and how low and for how long are the only variables.

Consumer confidence will return, if it has not already. On top of that, the government needs to continue to get credit flowing again and help existing homeowners keep their homes. There are many programs in place to help do this. Banks seem to be working with homeowners, through modifications and repayment plans, to help them keep their homes for the most part.

There is no denying that homeownership has many benefits and has a positive effect our national economy. I believe the people in position to help us through this understand this and are doing the right things. The market will always have its ups and downs. The severity of the business cycle, in either direction, is what we must control and prepare for.

Our economy and the world economy will benefit from getting the real estate industry back on track in 2010. I believe that the support and programs being initiated by the industry and the government will make this happen, and 2010 will be the year that noticable improvements in the real estate market are realized by the consumer.

Cal Williams

www.CalWilliams.com