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Waking up this morning trying to determine the stories I will write about is a bear. Seriously, everyone is talking about the bear real estate market in the media.

Even Time Magazine is getting into the act. When that behemoth wakes up to a story you know that it is in full form. When Time finally noticed that the housing market was on fire in 2005 the market was just about to turn south, so this article is probably timed perfectly to recognize what has already past.

What is amazing is how markets start to react. They initially look in denial when a problem is occurring. The builders had their time and money invested in developments and even though the warning signs were there about the slowdown, they continued to build. But now they have locked down and are doing the bare minimum to survive the downturn. Of course new home sales are down, the builders are cutting back on production.

And as Wall Street and main street see’s that the housing slump is going to start hurting them, they start to take action. Mortgage rates are starting to come down again. The Federal Reserve will jump in and risk a little inflation to lower interest rates to stop a meltdown.

Housing has always been a cyclical business. What we need to remember is that we experienced a huge high in the post 9/11 world. Low interest rates and a flight from the stock market sent a great deal of assets into housing. The rush to invest into housing by speculators and investors caused their to be an inventory surge and price jumps.

So now the dip to recover a modicum of equilibrium will be deeper. Housing costs that hit record highs also priced out their intended buyers. And those buyers that made the leap to buy did so with bad loans. Now these loans have to be flushed out, prices have to find their logical levels either through drops or stagnation letting inflation catch up, and the industry has to suffer to absorb the excesses.

Inventory that was purchased by speculators but not homeowners or renters needs to filter out of the system. When the speculators left, there was a significant part of the market that left with them and that needs time to sort out.

But housing will not be devastated. Tech stocks that supplied services that were not needed were devastated. If there is no use for an item it’s worth is $0. Housing will always be needed. Some cities like Buffalo and Detroit have too much for it’s population so they will be devalued. However, most cities will absorb the pain and keep moving.

So read the news today and remember. Yesterday was the day that the housing slowdown hit Wall Street. It was the day the story went from one discussed on the real estate websites and went national.

However, the world will not end and we will have some great opportunities moving forward as we absorb the excesses of the past few years.

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