Real Estate Market

The real estate market includes residential and commercial real estate. There are numerous individuals involved when speaking of the "market." Three key real estate licensed professional include the real estate agent or realtor, the real estate or property appraiser, and the mortgage broker or lender. Through an appraisal, an appraiser derives at respective property value. Also, land and building developers are fueling the real estate market through real estate development. On a smaller scale, individual investing and speculation has helped to increase home values to unprecedented levels. However, in recent years respective market gains have reversed while leaving some investors and/or home with mortgage values higher than appraised values. According to many economists and market data, the current state of the real estate market is reason for concern as the recent housing "boom" has ended.

The Real Estate Market "Top"

In 2005, home prices rose to historical levels. According to the National Association of Realtors (NAR), in April of 2005 sales of existing homes soared to a record high of 7.18 million. In addition, roughly 23% of all homes purchased in 2004 were for investment purposes. Also, a majority of home buyers made "no down payment" loans, making them especially vulnerable to a weak housing market.

Complimentary Request for Appraisal Form (PDF Format)

Teaser rates were also very popular, such as interest-only or negative amortization loans. A negative amortization loan will allow a prospective home owner to qualify for an introductory rate (sometimes as low as 1%) while differences in payment and accrued interest are added to the loan balance. A combination of low interest rates and these types of loans, led the market to unprecedented levels (sub-prime lenders make loans to borrowers with poor credit ratings). Presure on

The Real Estate Market "Downturn"

As of August of 2007, the real estate market had experienced its sharpest drop in 18 years. The delinquency rate on sub-prime mortgages had surpassed 12% (still climbing - please visit us again for an update). Going further, the market turndown had forced lenders to be more careful when issuing loans, while making it harder for individuals to refinance or purchase a home. The NAR had predicted that the "housing slump" would continue through 2007 and into 2008. Forecasts have been lowered from 6.48 million to 6.04 million existing home sales in 2007. New home sales have been revised to 852,000 from 1.05 million for respective years. In addition, housing starts are projected at 1.43 million from 1.8 million in 2006. There have been many predictions as to when the real estate market downturn will end (only time will tell). A bigger issue; is whether or not the housing market will affect additional parts of the economy.

Infecting other Parts of the Economy

Home values could have an additional effect on the U.S. economy. Anticipated defaults on mortgages and new lending standards could contribute to a gradual decline in spending by consumers. Less consumer spending may lead to a weaker economy, forcing companies to downsize while laying off workers. If unemployment rises, the real estate market could feel additional pressure as this may lead to a rise in home inventories. By mid-2007, inventories of homes had reached a 15 year high. This represents an 8.9 month supply at the respective current pace.

Please check back with us for updated information on the real estate market.

Key Terms

Appraiser Process Explained - Certified and Licensed Appraiser - Learn how the appraiser process is performed. A licensed real estate appraiser uses his or her knowledge of the real estate market to derive at property value.

Real Estate Appraiser Jobs - Trainee and Experienced Appraisers - How do you become a property appraiser? Click here for further information.