The American Psyche

Posted on May 16, 2008

After a year of bad news on the home sales front, there does not seem to be any relief in sight. In many areas of the country, local real estate boards and attorneys are proclaiming the light at the end of the tunnel. I am not sure that I agree. The fundamentals have not yet come into balance in order for markets to stabilize.

Real estate markets, as all markets, are in balance only when supply and demand are roughly equal. What is still lacking is an adequate demand for a vast supply of housing. Not that a demand does not exist, but that demand is tempered by the fact that prices are still not affordable for many people. If you couple that with the over abundance of new and existing housing units, we are not likely to see equilibrium in the market for some time.

While certain established luxury markets were not affected or have already begun to improve, the majority of middle income housing has a long way to go before normalcy returns. In fact for normalcy to return, a few factors representing other areas of our economy must change. Such factors as income, jobs, credit worthiness and prices (especially for oil and food) must stabilize.

Take the credit worthiness of borrowers. For the past twenty years the American people both individually and as a government have spent more than they earned. We have been told by our leaders that the dollar you borrow and spend today is patriotic. In fact, both Democratic and Republican administrations have proclaimed that to be a fact and by their own actions have shown us the way. The United States has spent its patrimony on consumer electronics instead of infrastructure, bloated government payrolls instead of educating our children for the challenges they will face, and oil guzzling SUVs instead of renewable energy.

The dizzying real estate bubble that caused home prices to climb to the point where people could not afford to own a home without unsustainable financing is a symptom of the problem. Will real estate and other markets return to “normal?” If you define normal as what the United States has had for the past twenty five or thirty years, the answer is yes. But, the future holds periods of prosperity of shorter and shorter duration followed by periods of weakening markets that will become more sustained.

Thomas F. Campenni CPM, CCIM has more than 35 years of experience as a broker and is licensed in Florida, New York, New Jersey and Connecticut. Since 1992, Tom’s focus has been working with a smaller client base so that he can provide the kind of individualized service that results in greater return for his clients and, consequently, greater client satisfaction. In addition to his real estate brokers’ licenses, Tom also holds insurance licenses in New York and Florida and has earned the CCIM (Certified Commercial Investment Member) and CPM (Certified Property Manager) designations. Please visit http://www.thomascampenni.com or email him at Tom@thomascampenni.com for additional information.

Tags: equilbrium, Housing prices, supply and demand, real estate investment