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Since The Year 2005, America Has Slipped Into The Worst Real Estate Market In History. In Order To Have Total US Economic Recovery, It is Critically Important To Get The Real Estate Market Back On Track.
The following article is an excerpt from Phil Mitsch's America's Financial Crisis Solutions Book, which he wrote in the Spring of 2008.
As we enter the year 2008 there are still millions and millions of Americans who refuse to acknowledge that the U. S. real estate market and overall economy are in very deep and very serious trouble. This is very tragic and very unfortunate because there is absolutely no way that the current Financial Crisis in the United States can be seriously and successfully dealt with until all Americans, their businesses, and our government: 1) acknowledge that it really exists, 2) understand the reasons why it developed in the first place, and 3) create, adopt, and implement the right types of Business Practices to eliminate it.
New, Revolutionary, And State Of The Art Business Practices Are Now Desperately Needed
As we enter the year 2008 the only way at this point in time to conceptually avoid the coming of the Second Great Depression and get the U. S. real estate market and overall economy stabilized and gradually back on positive tracks is to see that new, revolutionary, state of the art, and management to prevent crisis Business Practices are created, adopted, and then implemented. Implemented by whom? Specifically by: 1) the government of the United States, 2) the lending industry, 3) the mortgage insurance industry, 4) the investment industry, 5) the legal industry, 6) the real estate industry, 7) home buyers, and 8) home sellers. The Big Question however is: What specific types of Business Practices must be created, adopted, and implemented?
Definition Of The Worst Real Estate Market In U. S. History
When I say worst real estate market in U. S. history here’s what I mean. Since the year 2004 the United States has slipped into the strongest Buyer’s Market of all time. A Buyer’s Market traditionally favors home buyers. Why? Because the number of Sellers (supply) is greater than the number of Buyers (demand). As a result real estate values will decrease in this type of real estate market. However the United States has never seen a Buyer’s Market like the current one and believe me it will never see another one like it ever again. Here’s why.
Throughout the history of the United States an occasional Buyer’s Market, that results in real estate values decreasing, has been good. Why? The reason is because it helps stabilize and realistically equalize real estate values that have increased too quickly and for the wrong reasons. However the existence of the current and strongest Buyer’s Market of all time, which has developed since the year 2004, has not been good for the U. S. real estate market and overall economy. Why? Because this Buyer’s Market has resulted in the number of home sellers (supply) increasing to unbelievable, unprecedented, and record breaking amount levels. This market has also resulted in the number of home buyers (demand) decreasing (ratio wise) to unbelievable, unprecedented, and record breaking amount levels as well. As a result of skyrocketing supply and plummeting demand not only will it take potentially years to sell the inventory of real estate that is currently for sale but during this period of time real estate values will drop like lead balloons. What’s going to make matters even worse is that as more and more Americans and their businesses continue to experience financial and psychological problems, during the existence of this real estate market and overall economic Financial Crisis, the supply of real estate will continue to dramatically increase while the demand for real estate (ratio wise) will continue to dramatically decrease.
The above scenario is definitely not a good one for the United States to be in. Why? Because as America’s real estate values continue to decrease, so will the amount of America’s real estate equity continue to decrease as well. When you decrease and potentially eliminate real estate equity, which by the way is 1 of the 6 Fundamentals of the U. S. economy, from America’s economic growth formula it will result in significant deterioration of the U. S. real estate market. This then leads to significant deterioration of the overall economy as well. Why? Because whatever the direction the real estate market goes in the overall economy will follow due to the fact that the real estate market is one of the main vertebra that supports the U. S. economy’s backbone. Remember it’s this backbone that enables the U. S. economy to: 1) lay down, 2) get up, 3) sit down, 4) stand up, 5) walk, 6) jog, 7) run, and 8) sprint. So as you can see the condition of the U. S. real estate market has and always will have a tremendous impact on the condition of the overall economy.
Respectfully, Phil Mitsch