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How terrible is the real estate economy?

Real Estate Agent with 8Z Real Estate

Not a day goes by without someone asking me about the sky falling.  Is real estate crashing?  What's with all the foreclosures?  Are rates about to shoot through the roof?  And frankly, to watch the news, I'm amazed at the negativity and fear that the old school media is spreading around.

Here's the deal as I see it.  The fundamentals of real estate continue to apply. They never stopped applying.  The three most important thing about real estate are:  Okay, everyone together now:

1.) Location

2.) Location

3.) Location

If you buy right, for the right reasons, within the age old qualification strategies then you don't have anything to worry about (assuming of course that you haven't been fired, run over, or otherwise tragedy stricken)   Where the trouble comes from is those who got in a bidding war in Aurora, Colorado in July of '05 for a property with no great attributes compared to the neighbors.   Then when they financed that home with a 3/1 COFI ARM that teased them with a starting payment of $1100/month for a $500k mortgage for the first three months and that's all they could qualify for at the time-- then the payments went up $100/month every month for the last year while the excitement for the neighborhood wained-- that's big trouble. 

It's dissapointing that real estate professionals whether brokers or lenders participated in getting homes bought with some of those ridiculous mortgage programs but here's my summary:

Real estate, whether as a career or as an investment in a home is a long term proposition.  Real Estate is not particularly liquid and comes with many barriers to liquidity.  Homeowners, brokers and lenders who made short term decisions on real estate deals in the last 3-5 years using less than adequate thought processes are now facing problems, whether it's brokers having career problems, lenders looking for jobs or homeowners having cash flow problems. the real estate market has a knack for reinforcing the fundamental principals of the game-- the old borrowing ratios work: 28 % of your gross income can be used for your mortgage and you shouldn't exceed 36% of your gross income for all of your monthly obligations.  Find the best location you can afford and finance with a 30 year fixed rate, choose wisely and live in it, enjoy life and watch your equity grow.




Eric Bouler
Gardner Realtors, Licensed in La. - New Orleans, LA
Listening to your Needs
The market here is trending down. There are not a lot of buyers looking. Insurance rates are very high. Buyers are beginning to nible but think this slowdown will be here next year as well. It very local.
Sep 14, 2007 10:42 AM
Karen Monsour
Coldwell Banker Fort Lauderdale Beach - Fort Lauderdale, FL
REALTOR, SSRS - Sells FL Waterfront, Short Sale Expert!
Yes, a lot is local...however, if a buyer calls me, I am always positive. I don't think the market is really as bad as the media portrays it...then again...it's the media.  People have to live SOME WHERE!!!  The media are not experts in the field of Real Estate, we are!!! Are we going to let them ruin us, I'm not!!!!!!!!!!
Sep 14, 2007 10:47 AM
Bob Maiocco
8Z Real Estate - Evergreen, CO

I would imagine your local market is greatly impacted by insurance rates.  Our geographic region is fairly sheltered from most natural disasters (although I did once sell a property that was very close to an avalanche zone!)

 Insurance isn't a major factor out here except occasionally when a home has a shake (wood) roof in an area that could be hit with a forest fire.

 Today's news related to interest rates should be good news for Buyers who have been waiting for a great reason to take advantage of nervous Sellers!  So I'm looking forward to more Buyer activity in the next few weeks.

Sep 14, 2007 10:49 AM
Bob Maiocco
8Z Real Estate - Evergreen, CO



I agree whole heartedly.  As some sales manager once said somewhere;"It's not a problem.  It's an opportunity."  In Highlands Ranch, Colorado we see more and more buyers all the time and no evidence of any melt down.  It's hard to watch the news with a straight face about this "Crisis" and then come to work and have an inbox of buyer requests!

Sep 14, 2007 10:51 AM
John Novak
Keller Williams Realty The Marketplace - Las Vegas, NV
Henderson, Las Vegas and Summerlin Real Estate
Welcome to ActiveRain, Bob, from a fellow KW agent! Great point about the fundamentals of real estate. Whereas the media often takes way too narrow of a focus on just the present, those who look at real estate with a wider time horizon still have plenty of opportunities.
Sep 14, 2007 02:47 PM
Brad Andersohn
Retired Executive Director of Education at eXp - Boulder Creek, CA
ActiveBrad - 707.646.1876
Bob -

I see this is your first post on Active Rain.  Congratulations!!  I just wanted to welcome you to a fantastic Real Estate Industry Network! 

Welcome aboard, I hope you'll continue to blog, and invite others.  Wishing you all the success the industry has to offer.


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Sep 15, 2007 04:02 AM