While the recent credit crunch has certainly extend the nationwide downturn in housing, the much needed correction in unscrupulous lending programs and practices should set the stage for a much healthier and sustainable growth trajectory in residential real estate over the long term. The painful medicine in the short term, however, is a lack of confidence and trust among financial institutions and between borrower and lender that continues to serve as a drag on new sales activity.
Once confidence amongst all transaction parties is restored, the emergence of a more sustainable growth market should prevail over the medium and long term. Many industry obserevers see the "bottom" for the capital market and credit crunch as the Bear Stearns bail out by the Federal Reserve. Such sweeping Federal action and intervention is truly historic - and should continue to serve as a backstop of confidence for those who question how deep the credit crunch could go.
Word on the street is that the commercial credit markets are improving and more commercial loan syndications are clearing the market. It certainly won't happen overnight, but this may be one sign of many that confidence within the global capital market is returning to a more functional level. Eventually, an improvement in confidence should lead to more liquidity for mortgage backed securities, and a deeper pool of qualified candidates to purchase homes - whether custom homes, resales, foreclosures, or the like. Ultimately, these are the seeds that must be planted to drive a full recovery in the housing market and set the stage for steady, sustabinable growth for the next several years.
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