Recession on the Horizon?
The United States real estate market has been unstable since the events that took place in 2006; a year that was supposed to be a slight price correction but has turned out to be much more than that.
The dreaded “R” word (recession) was loosely tossed around here and there towards the beginning of the fourth quarter of 2006 but by the end of the year sales began climbing once again, leaving many economists to predict the correction was end by midway through 2007.
But the start of 2007 has been less than advertised in terms of increasing sales and a stabilizing market as the same economists are now predicting the correction to last until the end of the year.
The article, “Alan Greenspan and the ‘R’ Word,” written February 28, 2007 by Henry Savage and posted on Realty Times, explains how the U.S. real estate market may be in for more hard times before even thinking about a successful rebound.
“He may not be the Fed Chief anymore, but folks still listen to him. On February 26th, Alan Greenspan warned that the U.S. Economy could slip into recession by the end of this year.” “During a satellite link to a business conference in Hong Kong, Greenspan suggested that there are signs that the current economic expansion, which began in 2001, is coming to an end. As an example, he noted that profit margins in the U.S. have begun to stabilize, ‘which is an early sign we are in the later stages of a cycle.’”
Forecasters have been predicting the best possible outcome for the housing market over the past couple years but Greenspan said that many economists are now predicting a slowdown through at least some of 2008. First the correction was supposed to take place in early to mid 2007, then by the end of 2007 and now sometime in 2008.
Even as the housing slump digs in deeper every month, just about every professional in the industry laughs at the idea of seriously considering a recession is possible.
But housing vales have undoubtedly dropped but consumer spending is not expected to support even lower prices.
“Regarding the housing niche of the American economy, it seems to me there are two major issues that will indeed curtail consumer spending. First, the liquidity that poured into the economy as a result of the refinance boom no longer exists. Second, homeowners are feeling less wealthy because their homes are no longer skyrocketing in value. Even for folks who don't plan on selling anytime soon, the psychological effect when one's biggest asset no longer appreciating, or even losing some value, is likely to curb spending.”
If a recession does come to pass it should not be as negative and lasting as in the past and will be good news for the millions of prospective home buyers who are currently priced out of the market.
If you own property, do not worry. Real estate always appreciates over time. The only people a recession would really affect are homeowners trying to sell and avid investors. A recession may never happen but the rebound does not appear to be in the near future either.
