Economists Agree Real Estate Bomb Ready To Drop By Mike Colpitts At Isnare.com Ezine Articles

Real Estate markets all over America are making the transition from a sellers market to a buyers market, making many economists contend a national real estate depreciation is forthcoming.

There are still isolated markets that are strongly appreciating, but they are the exception after 15 interest rate hikes from the Federal Reserve Bank, a series of hurricanes to hit Florida and Louisiana and weakening state economies in Indiana, Ohio and Michigan. Foreclosure rates are already reported to be up 68 percent in those three states.

The National real estate market is changing. Some liken it to the days of 1989 when the real estate foreclosure rate hit all time record highs, but that was due to the national Savings and Loan Crisis caused by federal deregulation in banking and the resulting massive fraud by lenders.

Realtors report land sales have nearly ceased to exist in many parts of the nation, including Florida, California, Texas and New York, the nation’s most populated states.

Lenders are already bracing for change. Many have tightened guidelines, according to Economist Jon Capricorn, who says land has been the most rapidly appreciating real estate commodity over the past two years. “A lot of people are going to be left holding the bag,” said Capricorn. “Many people who bought land as an investment are not even going to come close to getting what they paid for it.”

Capricorn isn’t alone. Real Estate consultant Jack Winston warns that Miami, Florida is going to be the epicenter for failing real estate markets. “It’s going to be severe in Miami and it’s going to be problematic in West Palm (Beach, Florida). We’ve built too many units (condominiums) compared to the projections for real users.”

Winston believes the banking industry already realizes the severity of the situation in Miami. Some lenders have withdrawn financing on major projects and others are waiting to see what the market does.

Some 81,000 condominium units were in the construction, planning or development stages prior to the markets turn. Now funding for more than 15,000 units has been either cancelled or delayed.

Ironically, rates have been at their lowest levels in history for nearly seven years. Another economist, Henry Fishkind, warns investors to be cautious.

“When the mass mentality says we can make a $100,000 over night you know it’s too late,” adds David Sterner, an economist who has been a real estate consultant for more than 30 years. However, Sterner says it’s always a good time to invest in real estate. “Just make sure you get into the property you’re buying at the right price. You make your money going in.”

Nationally real estate cycles roll in 7 to 10 years, and judging from historical cycles this is just another part of the wave.

The U.S. Censes Bureau forecasts California, Florida and Texas will house 47% of the nation’s population by 2030 as more and more people flock to warmer climates. Economists agree that at least the real estate markets in those three states will remain strong over the long haul.

“It’s all part of the nation’s changing patterns,” said Sterner. “The interest rates will go up and down and things will slow down for a while. But nearly 40% of the national economy is now dependent on real estate. It won’t be long before things are fast again. It’s just a matter of time.”

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