Real estate and owning your own home is the American dream, you can’t count it out just yet. Real estate has gone through the worst times in the nations’s history. It will come back regardless of the recent events. What goes around comes around. There is demand and buyers for ocean front property, Fifth Avenue, and ski resort properties in 2008. It is a different story for lower income folks. Real estate prices are on the way down though, and lenders are going to make it possible for lower income buyers to get into a new home again. Some people will have to improve their credit rating but lenders will have to work with buyers if they want to see properties sell. The banks don’t want to own empty houses any more than they want to own dead mules.
The only thing that is certain about real estate values is change. Home and land prices where I live are a prime example. Land that was valued at few hundred dollars an acre before the last Great Depression of the 1930’s, went down to a few dollars an acre after the banks went bust. That same land is worth a few thousand dollars an acre in today’s market. A person could get the deed for a home in some small towns by paying the back taxes on it. Today those same old houses are valued at more than 10 times the local average annual income in this area. Hind site is always 20/20.
The latest housing crash in our country has turned the American dream into the American nightmare for many young families. Housing prices have been so much higher than personal incomes; creative paper work had to be invented to sell them. Houses started selling like cars, or furniture, no money down and low interest for a time unless you miss a payment. The real estate business will now find they have to work with new regulations that protect the buyer. Contracts will now have to be understood by the buyer.
I don’t think there has ever been a “worldwide housing bubble” that was ready to burst at the same time. Our new Global Economy might have created a problem never before seen and economists don’t have any idea of what the consequences will be if there is a collapse all at once. Housing costs aren’t just high around the world; they are in the stratosphere in many countries today. A thirty-year mortgage will have to become a hundred-year mortgage in some countries. That will sure create closer knit families if it takes that long to pay for a home, they better get along with mom and dad living in the attic.
It will be a slow recovery, if Japan is an example of how our present real estate market will return to anything close to normal. Some real estate in Japan sold for way over a $100,000.00 a square foot in 1989. Japanese real estate prices have been falling now for seventeen years. Commercial real estate prices in Tokyo have fallen more than 80%. Commercial real estate is doing the same thing in the United States today and housing prices will become affordable again too. Our economy has to create jobs now before real estate can start to recover.