Coach Unlimited

The question real estate agents everywhere are asking is “How long will the down market last?”  From what I can see the answer will not please them. We have just gone through the whole issue of the “bailout ” or “rescue” of the financial markets, specifically the credit markets, and many have acted like this is the solution to our problem. From what one reads in the press you would think that all of the economists are in favor of the plan that passed and think it was necessary. Nothing could be further from the truth. Many economists opposed the plan but this fact received scant attention in the press. This is important because one of their concerns is that the bailout will actually prolong the recession. Yes, I said recession. This is the other shoe that is about to drop or has dropped depending on who you talk to. An article today by Bill Fleckenstein for MSN is one of many predicting that a severe recession is soon to come. I attended a meeting the other day with the head of Connecticut’s (my home state) economic advisers to the Governor who says that by his measurements we have been in a recession since December of 2007.  The bottom line on the bailout is that it may help some banks and financial institutions, but it will do little or nothing for the mortgage and housing markets. Foreclosures will continue to happen at record rates (there is nothing in the bill to stop this) and this in turn will further depress prices which, in turn, will cause more foreclosures. Couple that with a recession that by all accounts will be very severe and the picture is not looking rosy. Anyone in real estate who thinks they can hunker down for a year or two and the markets will go back to where they were two years ago is sadly mistaken. The idea that anyone who is breathing can get a mortgage is gone, perhaps forever. Even when the credit markets return it will be a return to the markets of yore when you had to have the three C’s to get a mortgage. (Cash, Credit and Collateral) The pool of buyers has been drastically reduced. In the future you will need a good credit rating, a stable income and money of your own to invest in order to buy real estate. The days of “no money down” and “no income verification” are gone. The lack of buyers will force a lot of agents who’s abilities are marginal to get out of the business and for those who stay in there will be a need to examine their business model to see if it is going to be competitive in the future. I expect the changes in the economy to speed up the changes that I foresee in real estate (see my previous blogs) concerning how agents charge for their services and how they structure their offices.  When we finally emerge from this significant downturn in three or four years the landscape in the real estate industry will have been dramatically altered forever.