As with nearly every issue the media has a tendency to look at things from the most negative perspective – and the drop in the housing market is no different. Many home sellers in Maine and nationally are in a panic and without a doubt that desperation is working against them.
Recent stories in CNN Money, Bloomberg and The Financial Times have all decried the demise of the real estate market. As recently as last Friday Time Magazine prepared an expose on the falling housing market in Southern California.
I am not proposing that the market is not going through difficult times. Without question sales are down and properties are taking longer to sell. What is interesting, however, is how markets start to react. Initially there is denial that a problem is occurring. For example builders had their time and money invested in developments and even though the warning signs were there to slowdown, they continued to build. Now they are severely cutting back and simply trying to survive!
Wall Street is taking action and mortgage rates are beginning to show signs of retreating. The Federal Reserve will probably move to reinforce lower rates and keep the market from a complete meltdown, risking some mild inflation in the process.
People forget that the real estate market is cyclical in nature. Housing costs that hit record highs also priced out their intended buyers. Those buyers that made the leap to buy (when they really couldn’t afford to do so, obtained bad loans. Now these loans have to be flushed out, prices have to find their logical levels and the industry has to suffer to absorb the excesses. This is a natural market process.
Inventory that was purchased by speculators but not homeowners or renters needs to filter out of the system. When the speculators left, there was a significant part of the market that left with them and that needs time to sort out as well.
Perhaps the dip will be deeper and more prolonged than anticipated, but a recovery will occur. Housing is a product that is needed – by everyone! The market will not be destroyed.
Posted by: Michael Sosnowski
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Maine Real Estate
Interest rates
Business News