Tuesday, February 24, 2009

Real Estate Market Growth in 2009

The long standing jinx about the real estate market prices rising year after year has broken with the current credit crisis. Since the last recorded data in the 19th century, the last three-four years have hardly seen any appreciation in real estate prices. Most commercial and housing real estate is currently in a depression with reduced demand and rental rates falling.

What comounds the problem is non-availability of attractive loan programs which would otherwise help pull in customers. Several banks have been hit hard due to the credit crisis. AIG being the hardest hit which required a $150 bn bailout. There is a lot of bad credit in the market which needs to be cleaned and recycled before seeing any change in the real estate market.

However, there is some good news for the real estate industry. Certain states like Montana, North Dakota, Texas and Georgia were immune to the current credit crisis and managed to see some real estate business generated. Several states have published foreclosure data as business but this actually is an overall loss to lending banks. Foreclosure rates have been peaking since the current credit crisis which is not a very good sign. According to estimates nearly 4 million foreclosure were filed and the number is expected to touch 7 million by 2010. This will but the whole economy into a loop where on one hand lending banks will lose money due to foreclosures and non-recovery of loans, and on the other hand people in bulk will lose jobs due to falling profit margins.

Overall, 2009 will not see a substantial growth in the real estate sector. Whatever business will be generated would be a salvaging effort of failing home loans.

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