Recent History of the Real Estate Market
In today’s economy nothing is constant. Leaders change, as do political views, employment, and how we see our future never stay the same. This is true in the real estate market as well. Home ownership used to be not only a lifetime dream, but provide a place people would live for their entire life. In the past, mortgages and interest rates remained the same for the 30 years it took to pay off the home. Now people move into new homes every few years (if they can), across town or into another part of the state or country.
The concept of buying a home, the mortgage term, and interest rates vary widely today. During the 1980s the economy in the United States and throughout the world was growing quickly. Consumers felt certain they could repay their mortgage even though the standard mortgage interest rates were relatively high.
The real estate market changed drastically by the early 1990s in North America. Rising interest rates and rapid inflation were constant topics of discussion especially in the real estate marketplace. The optimism of the prior decade had all but disappeared. The weakened real estate market made economic improvement more dependent than before on gains in manufacturing and jobs.
The same rollercoaster happened during the economic depression in the 1930s, but some real estate companies managed to pull through those hard times and come out stronger when sales began to improve. In the 1940s a building boom reestablished. Most of the real estate agencies that remained were companies committed to cutting-edge property management and dedicated to business integrity. The same will undoubtedly be the case after this downturn.
The government’s attempt to fight foreclosures has only slowed the spiraling downturn. They are now hoping that getting the job market moving will help the economy enough to heal the housing market as well. To a small extent it seems to be working. Between 2000 and 2010, the U.S. saw the worst foreclosure crisis in history. In 2010 home sales hit the lowest level in 15 years. There were 1.3 million formal foreclosures that year alone. Over 9 million more homeowners are risking foreclosure.
The housing market has been depressed even more by 10% unemployment. Beginning re-growth in manufacturing indicates that the economy will likely not slide back into a recession. However, the tax incentive the government offered new home buyers provided only temporary relief for the real estate industry. The end of the homebuyer credit, combined with lower consumer confidence, and joblessness, caused a decline in the new housing market. Construction on new homes slowed and finished homes remained on the market longer before the sale.
Lenders have been offering new, more creative buyer’s packages, making home ownership more affordable for first-time buyers. Sub-prime interest rates, longer amortization lengths, more flexibility in scheduling repayment, and lower down payments have fostered the idea again that almost anyone can become a homeowner. This more optimistic outlook caused home prices to begin increasing. In some areas the homes rose out of reach for those new buyers these lending packages had been meant to help.
First-time home buyers are actively competing with cash investors. On average these buyers make about 10 offers before they finally buy a home. Short sales are dominating the market, competing with bank-owned properties. Individuals with stable jobs, established careers and high median incomes are the ones bringing the real estate market up again. The average time for homes on the market is about two months in many areas of the country. More confidence in the economy and how well the stock market is doing affect the housing market in a positive way.
In retrospect, the past few decades have seen major highs and lows in the real estate market. The current market appears to be less dramatic and volatile than past peaks and valleys. Interest rates are staying low and remain fairly stable. The U.S. market has become stable, at least for now, in buyer activity and price. The real estate future cannot be accurately predicted since the previous period has been unprecedented in its instability, but there are now signs the housing market is on the way to a gradual come back.