A lot of people are asking, "When is the real estate market going to turn around?" I've seen various predictions,
next spring, spring 09, maybe not until 2010 or 2011! The truth of the matter is that nobody really knows for sure when the real estate market is going to turn around.
My first thought on the matter is that I don't think that a lot of people truly know what a "normal" market looks like. For the last 10 years we have been in a boom market and I'm afraid that even if the market does return to some kind of sustainable level in the near future that this won't satisfy a good number of people.
The second thought that runs into my head is that I don't think that the economy is as healthy as people say that it is. True, the stock market is doing pretty good, but did you know that one of the reasons that the stock market is so high is because of the fact that the majority of earnings from the fortune 500 companies listed on the stock exchanges comes from over-seas earnings? That if it weren't for the foreign earnings that many of these companies would have lost money over the past several years. General Motors is a prime example of this.
I'm also concerned that a lot of the economy that we do have is based upon the fact that the government is 
spending money like crazy. To me this is like throwing a party and paying for everything with a charge card. You can have a hell of a party if you don't mind running up your VISA bill! "Hey, instead of a DJ, let's get a band!" "Pizza is here, who's got the plastic to pay for them?" "Hey George, We're getting low on beer, what's your number so I can order another keg?"
So forth and so on. How long can we keep the party going before we reach our limit on the cards? We've already ran the "good" cards up to their limit and are now having to used the higher interest rate cards in order to entice foreign investors to buy our bonds. At this rate we're going to have to send somebody down to the Citco station for the next round of beers!
What happens when we have to come back down to earth and the government stops spending money like a sailor on shore leave? The economy is going to slow down, yet the government is still going to have to pay these massive debts down or at least pay the interest on the debts. This means that taxes are going to have to be kept higher than they otherwise would be and this will prove a drag on the economy.
So, all that said, what's my prediction? I think that absent any kind of major disruptions to the economy (such as people realizing that our economy is being completely mismanaged) that buyer's will start getting bac
k into the market as early as next spring looking for bargains. This will provide a floor to the market, but I don't expect the real estate market to return to anything near what it's been like over the past 10 years anytime soon, if ever!
Now, if we suffer any kind of major disruption to the economy, such as an oil shock or foreign investors deciding that our economy is just too risky to invest in, then it could be a long, long road to recovery! If something like this happens, I wouldn't look for housing to rebound in any significant way for a long, long time. Generally speaking, the longer the party, the longer the hangover!
Bob Mitchell
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