Real Estate Cycle Overview/Outlook

While I can't take credit for writing this, I thought it was interesting & insightful enough to present....

If one looks back on previous economic cycles, typically housing recessions have been followed by big booms in the industry which have usually persisted for at least two to three years. Is this the same? Many experts think not, since the forces driving the current downturn are much different from those in the past. Before the 1980s, pent-up demand moved housing. The Federal Reserve would tighten, to keep inflation in check, which increased the cost of mortgages. There was no "secondary market" for mortgages, and many homebuyers put off buying homes because they were unwilling to pay the higher mortgage rates or because they were unable to get loans. During the economy-wide recession that usually ensued, interest rates fell, and this "pent-up demand" boosted home buying. What about now? Although higher rates helped the housing downturn, but many potential borrowers who would like to buy homes cannot obtain the credit. We are now faced with a huge potential supply of housing, as foreclosures mount and many move back to renting instead of owning.

-from my corporate Director of Capital Markets