I see definite signs that the real estate market is heating up. Whether you voted for our current administration or not, the O’Bama administration is breaking the market out of a deadlock. With all the money being poured into the real estate industry to delay foreclosures, short sales, and lower mortgage interest rates plus the $8,000 tax credit for first-time buyers, the market is starting to shake and get burned.
Now let’s face the facts. New market construction started to slow down over 3 years ago. Inventory is shrinking as homes continue to shrink. Additionally, many properties disappear each year due to age, rezoning, and natural disasters. If we continue to add another 3 million citizens each year, then we are really going to have a real estate shortage in the next 2-3 years.
The tried and true rule of basic economics is that supply = demand. As demand continues to increase, a supply shortage is created. Therefore, prices begin to rise. The stimulus bill will likely put extraordinary pressures on our economic system, creating extreme INFLATION pressure. You just can’t spend and spend without paying. The payback comes in the form of inflation…prices go up!
Some forecasters predict that property values will likely double from the market’s peak in 2006 due to inflationary pressure.
Understand this, if your house was worth $200,000 in June 2006, then 5 years from now it could be worth more than $400,000. All this due to inflation. Take a look at history, the stock market boom of 1920 led to the crash of 1930. The real estate boom years of 2000-2005 fueled national growth by 80% of GDP. This led to our bubble bursting this year.
So if the story is true, it will be hard to escape the inflationary pressure this will bring to our nation. But, the good news is that the real estate market will prosper.
