Three Biggest Challenges Facing Real Estate Today

It’s probably no surprise to anyone that the real estate industry is still down.  If the industry hit the crest of one of the biggest real estate bubbles in history around 2006-2007, it’s safe to say that real estate probably hasn’t even hit the bottom of the trough yet.  What’s even more hard to believe than how long the real estate industry has been in a slide is the fact that the market is still down in spite of the lowest mortgage interest rates in recorded history.  There are many reasons that home owners and home buyers are giving for the current market conditions and a recent Realtor survey shares their thoughts on the biggest challenges facing real estate today.

In Realtor Magazines September poll, the following three reasons were listed as being the biggest challenge to the real estate market;

1. Unemployment (54% of agents surveyed) – This is not only because of the obvious reason,  unemployed can’t afford to buy a home, but also because  so many people with jobs are living in fear of losing their job.  I recently heard this from a couple who could more than qualify for a nice home with a super low mortgage rate.  When I asked them what’s holding them back, they said they wanted to wait until the job market started to rebound.

2. Lack of capital (25% of agents surveyed) This be interpreted one of two ways; either there isn’t enough money/capital flowing into the mortgage markets, or people don’t have enough money for a down payment or if they have enough for a down payment, that’s about all they have.  Hard to get a mortgage these days with no reserves.

3. Distressed Properties (19% of agents surveyed) The problem with all the foreclosures is they bring down the value of every other home in the neighborhood.  The way appraisals work (or at least the way they used to work)  is they have to find three comparable properties within a reasonable distance from the subject property that have sold within the past 6-12 months.  If one of the three homes that meets that requirement went into foreclosure and was purchased at a deep discount from the bank, it will seriously bring down the average value of the three comps and the home you are trying to buy or sell. As a result, many homes are appraising for less than they were purchased for.  This means that thousands of homeowners can’t sell and buy up, or buy down for that matter.

Clearly the first of these three challenges has to change before the other two will.  If people are working and have confidence in the job market then they will start to think about buying homes again.  Also, if more people are working, fewer homes will be slipping into foreclosure.  More jobs are the answer and unfortunately there is not any easy solution to this current problem, just ask our president.

Sorry I don’t have a better answer for you today!


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