Article Advise

submitted: Aug 28th 2008 | by: HalJames | Total views: 1 | Word Count: 471 | |

Every day seems to dawn with some new bad information regarding the state of real estate across the nation. From values in the tank to record foreclosures, things are just about as ugly as anyone could have imagined.

Of course, you already know most of this. The question for many people in the real estate market or considering getting into it is whether we are at the point where things will start to turn around. Put another way, have we found the bottom of the market?

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.

If one focuses just on the real estate market, a turn around seem inevitable by early 2009. Of course, the real estate market does not just sit in isolation. It is part of the overall economy, which means additional factors have to be taken into account.

While the real estate market seems primed to turn around, there is another factor that is putting the breaks on it. The credit crunch is the fundamental problem and one that is expected to get worse in the next year or two.

It is rather ironic. The problems of the banking industry are related directly to the problems surrounding subprime mortgages. This has resulted in banks failing or under severe stress, which means they cannot loan money to buy homes now.

While it might appear the worst is over, the truth is things have only begun to crumble in the banking industry. The Federal Reserve has taken unheard of proactive action to keep things under control, but it can only do so much.

While there has been a lot of focus on the subprime loans as the cause of this mess, such an explanation is too simple. There were plenty of other loans that were bad as well. Stated income loans, known as liar loans, are now failing.

As you can imagine, many of the liar loans were not based on prudent economics. Well, the mess is starting to come home for the banks and most expect the pace of bank failures to pick up dramatically through the end of 2008 and 2009.

How bad are things? So far, most bank failures have been limited to small regional banks. Now, however, it is expected that at least one huge bank used by millions is going to fail by the end of the first quarter of 2009. Nobody knows the name.

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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