How Will The Real Estate Market Affect The Economy?

By: Scott English

Turn on CNN, MSNBC, Fox News---the hot topic is real estate, and the next topic is the economy. It certainly has not been positive in the last several months. With the declining market hitting the airways, more and more people are beginning to pay attention. Do you believe it has an overall effect on other industries? Many involved in this industry firmly believe that the trickle down effect of the declining real estate market may be somewhat devastating.

Realtors are typically big consumers of upscale automobiles; after all you have to have a nice car to drive your prospects around in. ( The price of gas already has had some effect on Realtors and buyers. Many a Realtor will certainly think twice about running across town to show a property to an unqualified buyer.) They love to buy better homes, after all, how it looks to clients if you live in a rented apartment. They frequently dine out (always working) and they spend huge amounts of money on entertaining past clients and prospecting for new clients. In addition, to enable their business to function, they purchase services from affiliated vendors that cater specifically to the real estate industry. Marketers, printers, magazines, appraisers, mortgage companies, banks, attorneys, title companies, inspectors, and the list goes on. In the past 5 years, other vendors that have entered the arena are websites, hosting, internet marketing, and a variety of other vendors that will take a hit as the real estate market continues to decline.

If you listen to all the media and their opinion on this situation, no one really gives a solid factual reason that this phenomenon is occurring. Mortgage rates are still very low; there is an incredible amount of inventory for buyers; people still need a roof over their head. Where are all these people living? Are they renting? Certainly the rental market has seen some increased activity when buyers decided not to purchase. But again, many sellers are putting their properties to lease since they are in a quandary and may not be able to sell in a timely manner. Days on market---a term frequently used by real estate agents, is increasing in most areas across the nation. This factor is often used to scale the activity level in a given area.

A factor that keeps many companies going strong is the ever prevalent relocation market. Major companies hire strong corporate relocation companies to provide a consistent base for relocating their employees in and out of local, national, and international positions. This extra added business is a positive to the declining market of today, as this business is rarely affected by market trends.

And the facts remain, that in the last six months, buyers who might have qualified for a specific program and wanted to purchase, have been cut out of the mix due to the changes in the mortgage industry eliminating many buyer programs. Many industry leaders knew that eventually the ax would fall, but most mortgage companies and banks stayed in the game as long as possible. To their detriment, because the tumble came so hard and so fast, many mortgage companies could not survive and went bankrupt.

In closing, have you thought about the financial trickle down of the national declining market and how it will affect you? I have.

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