When the Real Estate Market Changes – The Blame Game Begins
The Chicago Tribunes Mary Umberger has an interesting article on the housing markets transition from an overheated speculation market to a slower, more traditional market. The housing market slowdown has created the blame game as everyone is trying to explain away the transition.
Last week, home builder Robert Toll, CEO of Toll Bros., one of the country’s largest builders, jumped on the blame bandwagon, pointing to terrorism, the war in Iraq and Hurricane Katrina as reasons for the weakened demand for housing.
From Toll to mainstream analysts such as Shiller to 30 or so boisterous blogs devoted to the predicted housing bubble pop, the post-mortem is under way to determine what led the housing market to overheat, possibly to a point of no return.
Among the leading suspects: a bubble-obsessed news media; overly cheery housing-industry economists; zealous real estate agents; and bankers offering low mortgage interest rates that carried on too long.
The list goes on: overly lax lending standards that made homeowners of people who could not afford it; the horde of neophyte investors who overpaid for their acquisitions; and builders throwing up too many houses.
Or maybe, some say, it’s housing fatigue: sellers fixated on getting unrealistically high prices and buyers just taking a breather from the binge.
“There was all this cultural stuff that grew up around real estate,” said Doug Duncan, chief economist for the Mortgage Bankers Association in Washington. “I think there’s a sense of emotional exhaustion.” via the Chicago Tribune.
But folks, we know that a market that was showing 20 percent appreciation was unsustainable. And we know that homes will not go from 1 million dollars to 3 thousand dollars as stocks did proportionally after the tech bubble collapsed. The real estate bubble as we call it will be the period where we absorb the excess inventory that builders have created and speculators are dumping.
Will we see the huge housing increases again for a while on a national level, probably not. But will we see wholesale carnage on the horizon? I sincerely doubt it. A deep breath and a little logic will go a long way to understanding the market.
Great points Tom - the flavor of the day solution is only adding to the instability and volatility.
When Washington ...
I see it all too often where owners decide to be investors without understanding that tenants have rights. Its ...
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please contact me via e-mail if interested in the home listed
above.
jonieckstrom@yahoo.com 
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Pingback by Nine 9/11 links . . . | BloodhoundBlog | The weblog of BloodhoundRealty.com in Phoenix, Arizona on 11 September 2006:
[...] It doesn’t do to insist that the sky cannot fall. Five years ago today it did. But The Real Estate Bloggers have a nice take on bubble frenzy: “Will we see the huge housing increases again for a while on a national level, probably not. But will we see wholesale carnage on the horizon? I sincerely doubt it. A deep breath and a little logic will go a long way to understanding the market.” Amen. [...]
Comment by Kaye Thomas on 11 September 2006:
Excellent article.. I just posted somethng very similar on my blog. No one wants to accept that real estate values go up, go down and sometimes do nothing because real estate is controled by supply and demand. No one has control of what real estate other then the people directly involved.. buyers and sellers.
Comment by Benjamin E. Bivens on 12 September 2006:
In a new blog site dedicated specifically for consumers by consumers there is an article that appears in Motley Fool, which I believe is sound advice to any consumer out there.
My opinion is that there is going to be a transfer of wealth soon as markets fill up with inventory and sellers start to panic and drop prices, increase selling incentives and basically liquidate to get out. We’ve already seen that happen in the greater Washington DC area, where builders of speculative high rise condo conversions are putting BMW Z4’s in garages of recently sold condos for buyerrs and giving vacation packages and intense bonuses to real estate agents for selling thier units. That is just one indicator. The big one is inventory and the amount of time it will take to clear off the market compared to the amount of buyers out there to purchase at the prices offered. In some pockets there is still very high competition and demand for these properties. A good broker is going to have anticipated the shift several months in advance by keying into major factors and minor hints of a change. Sometimes the consumer will not believe it, but when they enter the market they are totally blindsided.
This site is pretty neat http://blog-e-state.blogspot.com/ it actually has been created to provide consumers with a voice as leverage putting the control back to the people. And hey they can also give praises to their service providers if they want. I’ve heard of so many people that have had a bad real estate experience, and especially in a transitional market there can only be more. Only the truly professional service providers will survive the upcoming market shift. It will actually weed out a bunch of the chaffe and part timers as well as allow for a great investment market. As Robert Kioysaki said in an interview with FSB a while back that he was wating and praying for another real estate crash, well Robert, Let the shifting of the wealth begin! I’m ready!