The New "Downsized" Real Estate Forecast

There are new economic forecasts pouring in from Wall Street that there will be another down turn in home values in the months to come. Economists are predicting decreases between 3% to 5% nationally, but some markets could see greater declines. This should come as no surprise as new home ownership economic stimulus money dried up in April of this year, employment is sluggish at best and consumer confidence is in steep decline . It is sad but true that without government incentives people are just not that optimistic about purchasing real estate. You would think with mortgage rates at historic lows, home prices 35% off their market highs (much more in some areas) and plenty of seller incentives on the table, buyers would be flocking to home ownership. Fact is in down economies cash is king and most are holding on to cash for necessities and emergencies. People feel in their gut that we will be in a down economy for several more years and gambling on home ownership is not a option at this time.

What drove the boom in real estate values from 2001 to 2006 were market speculators, investors and huge Wall Street REIT pools. There was plenty of cash to be made and everyone wanted in on the game. Cash was everywhere flowing like a river. Like all good things must come to an end, in August of 2007 financial markets froze and the party was over. There is an old adage that greedy pigs get slaughtered. Most "pigs"who participated in the speculation are now broke or slowly becoming broke. Real estate can be a good investment depending on what time frame in the economic cycle you hold it.

The bottom line is that real estate is in essence shelter. Along with food, air and love we all need somewhere to lay our head at night. There have been decades where real estate was never seen as an investment, but as a home to raise your children and shelter your family from the storm. Purchase real estate not on speculation, but on becoming a member of the community and laying down roots. Owning a home adds value to everyone that surrounds you, not to mention tax advantages and a potential for appreciation. Renting will never feel as good as owning and owning now is cheaper than it has been in 10 years.

http://money.cnn.com/2010/06/23/real_estate/new_home_sales/index.htm