Better Times Forecast For Real Estate

by : Mike Colpitts

Nearly half of all 50 U.S. states local housing markets will at least be on the road to recovery by the end of the third quarter of 2007, according to Housing Predictor, an information driven web site, which provides independent local housing market forecasts in all 50 states.

Markets in 13 states, most of which are located in the southern half of the nation are already stabilized and are experiencing market appreciation in home values. The states include Georgia, Alabama, Mississippi, Texas, Louisiana, North Carolina and South Carolina and Utah and Idaho in the west.

However, many local markets on the west and east coasts particularly in metropolitan areas will continue to experience market weakness and depreciation in housing values and slower activity through the year's end.

At least nine more states local markets, however, will experience an upswing in values in their housing markets by the end of September. Housing Predictor's projections are based on economic and local market dynamics in each market.

Housing Predictor expects the U.S. Federal Reserve Board to lower interest rates to aid housing markets in returning to a healthier balance in the third quarter of the year. In a survey conducted in February on the site an over-whelming majority of respondents of 91% said they believe the Fed manipulates the U.S. economy by controlling interest rates.

The markets will continue to gain momentum as the Federal Reserve Board responds to the call for a drop in mortgage interest rates by lowering the discount rate to aid many housing markets in pulling out of the doldrums and spur more buyer activity.

Inventory of homes for sale in many markets is at an all-time high or at least at the highest level since the early 1990's when the real estate markets were rocked by the U.S. Savings and Loan Crisis. The absorption rate, which is the rate at which available homes for sale are purchased will take well into 2008 to lower. New home construction in the majority of housing markets has slowed to a crawl and many builders are offering incentives to buyers to purchase new homes.

The inventory of vacant homes on the market for sale is at 2.1 million, the highest level in history, according to the U.S. Census Bureau.

After more than five years of record appreciation in many markets the Fed's increase in interest rates, coupled with a series of national disasters and resulting higher insurance premiums saw housing markets in many states come to a standstill. A flattening occurred in many areas at first, followed by a fall in prices.

Historically real estate cycles last 7 to 10 years in most local markets. Typically two to three years are booming, followed by a two to three year period of flattening and then lower prices result in the last period. The transition period lengths vary from state to state and market to market.

The real estate market has historically been the predictor of national economic cycles and has led the cycle in changes 12 to 18 months before national economic shifts. The majority of recessions in the U.S. economy have been preceded by down turns in real estate.