Why has the Real Estate Recovery Stagnated
What’s up with the real estate market? That was the question I heard recently at a workshop for real estate agents and brokers. If the recession has ended, then why is the real estate market so flat? Property values remain at or below the affordability levels in most markets. Lenders have billions of dollars in excess cash to lend, and foreclosures are down to their 2006 levels.
By all standard measurements, the real estate market should be booming, and yet it isn’t.
For the average buyer, the answer is complex, and yet is has a very simple core: incomes are down in most markets, meaning that real estate, although at attractive levels, is basically off-limits for the average income earner. We are basically in a deflated economy, and as long as we remain in one, first-time buyers and buyers who are struggling simply will not be able to buy.
Now of course, when we shift the discussion to luxury real estate, the rules don’t quite apply. Those who can afford luxury real estate are unaffected by the stagnant incomes, and most properties are quite affordable and within their reach. In fact, quite truthfully, this is a great time to buy if you have excess cash. This is a great time, especially, to buy rental properties, because first-time buyers are shifting their attention to renting rather than buying.
So it’s all about perspective. For some, with incomes that are flatlining, this is not a good time to buy. For others, with incomes far beyond the norm, there has never been a better time to buy.
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