From Chaos To A Renewal

2007 was a bad year for the U.S. real estate industry. The scale of the problem became clear in the second half of the year. For some of us, by late 2006 we started to see some problems in the credit market. In December 2006, Ownit Mortgage closed its doors. In early January 2007, Wall Street investors restricted some of their investments in mortgage backed securities. With the collapse of New Century Mortgage, the problem for most Mortgage professionals became apparent.

2008 is going to be the worst year ever for the real estate industry in the United States. The banking system is not going to collapse, however, lending as we have experienced it for the past 10 years is gone. This crisis is both affecting the residential and commercial real estate markets. Two type of lending is going to survive, lending offered by large banking institutions to A (best) credit borrowers and lending extended by small and/or large private/equity/hard money investors.

Out of this collapse, a more balance real estate market will emerge. Homeowners, investors, banks and real estate professionals that had a reasonable approach to real estate will come ahead. Most speculators are experiencing and will experience serious losses. The only challenge is to forecast when the return to stability will happen. This stability may not comeback until the end of 2008 or sometime in 2009.