Real Estate Market Slow To Rebound

The federal government has exhausted their options for trying to help the real estate market rebound. Low interest rates, loan company bail-outs and mortgage refinancing deals have gone nowhere fast.  “There isn’t a lot the government can do to prevent foreclosures,” says Paul Willen, a researcher at the Federal Reserve Bank of Boston. “And we’ve just been banging our heads against the wall now for four years, trying.” Laurie Goodman of Amherst Securities forecasts that 1 in 5 homeowners will have trouble with their mortgages in the coming years.
 
The Feds understand all too well that America’s prosperity is closely linked to what’s going on in real estate. Americans need jobs to buy homes. More importantly, Americans need jobs and homes to feel confident enough to spend in other places. In a typical expansion, Goldman Sachs says that housing contributes half a percentage point to growth in GDP. Over the past year, housing has actually subtracted 0.15 of a percentage point from our GDP in a negative feedback loop.

Real estate agents have met with many disappointments over the past three years, with prices starting to flatten out, only to drop once again. Forecasters keep saying the tumbling real estate values are done dropping, but it’s clear that most of America is not over the hump just yet. Perhaps prices will begin to stabilize in 2014, some say. For now, new construction is depressed, sales of new homes are low, delinquencies are high, and foreclosure auctions are keeping prices low. Technically, real estate has never been cheaper in the US – for those who can afford to invest anyway.

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