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The Harder it Gets, the Closer We are to the Bottom
August 14, 2007 | posted by: Andrew C Maleski

It has been a rough year for anyone in real estate. Sales are down, prices are softer, and real estate is no longer the main topic of social gatherings. It is, again, a dull business like it used to be. It's harder to make a buck, and it's much harder to sell even a great property not to mention a "dog" house sitting next to the freeway.

With all that gloom and doom, we are getting faster to the bottom of this slump. The harder it gets, the closer we are to the bottom of it. It feels like someone just applied brakes to a speeding real estate train. The train will eventually stop but we do not know how long it will take and how many casualties it will cause.

The first casualties are many borrowers with sub prime loans. They are losing homes. Next in line are foreclosing lenders. Some of these lenders have resold their loans in the secondary market so the risks have shifted from banks to hedge funds and private equity firms. You've probably heard of the few that reported heavy losses which caused the tightening of credit and higher interest rates for new mortgage loans.

The real estate ride is getting tougher and the excesses of the most recent boom are being slowly trimmed to make room for a more normal and balanced market in the future. This is good news in the midst of bad news. Before this happens there will be plenty of other casualties including homeowners with good credit and conventional loans who simply overextended themselves. In stocks, they call it a "correction" when the market goes down. In real estate, where we are used to solid property gains in recent years, this seems like a tsunami. Remember the old saying "what goes up may come down". So do not panic, we will get over this slump, the same way we got over the last one.

I also see some encouraging signs. Certain property listings suddenly look attractive now. With plenty of inventory, buyers now have more choices and more time to make wise buying decisions.

Copyright Andrew C Maleski 2007. All rights reserved.

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