I spent the weekend in Atlanta at John Ulzheimer’s GetCreditWise seminars. Georgia has the highest per capita foreclosure rate in the country and the fourth lowest credit scores in America. While I was there, I talked to people who were trapped in dangerous ARM mortgages and a mortgage broker who recently saw her sponsoring bank go out of business. From that perspective, the future for the real estate market looks pretty bleak.
When you add in Bernanke’s inflation concerns, a surplus of homes on the market, the impact of the subprime lending fallout and possible congressional industry reform…a lot of people in the business are starting to call time-of-death on the housing boom. One real estate broker in California went as far as saying "Real estate in America is officially dead" in a must-read post on his blog:
In my opinion, the ultimate affect of the real estate bubble — and its mostly unanticipated implosion — is that the entire asset class will fall out of favor for many years, possibly for a generation. Only a select few will benefit — those who had the foresight to sell now and squirrel away the money safely before the real anguish begins.
Okay, okay! So maybe that is one extremely pessimistic view. There are plenty of people out there who think the housing market is going to continue to grow. What do you think will happen to the real estate market?
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I don’t think we’re looking at a full blown implosion, but a slowdown is already underway. Those that adapt their strategies quickly will be best equipped to survive the dip.
The reason why investment on real estate have decreased tremendously as higher-income households are spending less because of big losses on their homes, retirement plans and other investments. Lower-income households are cutting back because they can’t borrow like they once did.