I agree with the "glass is half full" theory. I live in Texas and it has in general done well through this period. Job growth is very good. Manufacturibg is down some but improving and job growth in technology, engineering, healthcare are doing very well. Recently housing prices started to rise here again. Texas is not immune to national economic factors. However, most of the impact to Texas has been fueled by consumer sentiment as a result of what they hear as a national crisis. Also, many of the national homebuilders, banks, and lenders in Texas are impacted by what is happenig in the regions having serious problems.
In so many cases of a crisis there is an over-reaction to. In this case the lenders and their investors went from crazy lending practices to a "no" lending practice.This has a domino affect of making it impossible for home buyers (who are not stretching) to get a loan to purchase a new home. When that loan doesn't happen, it means someone with a house to sell doesn't get to sell it. This in turn results in either a foreclosure or the seller reducing their sales price (both of which are broadcasted negatives). It use to be the goverenment was trying to figure out how provide mortgages so lower income families could purchase a home. The private sector figured out how to do this through subprime mortgages without the goverenment red tape. This is not to say they didn't go too far. But there has been a history of this within the lending industry. Remember 15% negative-am loans in the 1980's? It was crazy but we got through it. Every economic cycle I have seen, the lenders start cautiously and slowly migrate to overkill like lemmings. If one high rise condominium project is good then 20 are better. Same for apartment complexes.
What is usually reported by the media is the percentage of increase in foreclosures over the previous year. What they should report is what percentages of mortgages as a whole are defaulting. This is a number that is not that scary.
I should say in the interest of integrity that I have a medium size homebuilding company and was a commercial real estate agent before. Therefore while some of views may be skewed by self interest, they are also informed by my long term knowledge of these industries.
RESIDENT EXPERT
Daniel McGinn
Housing Optimism
Why the year in real estate wasn't all bad news.
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The end of the year is a time for taking stock, for looking back on the work you've done and hoping, just maybe, for a bit of appreciation from bosses and customers. And if you write a column for a Web site with a big button marked "E-MAIL THE WRITER" under your picture, you can hope for some measure of thanks from readers. Unless, like me, you've spent the second half of 2007 writing about the real estate market, which I've variously described as "languishing," "plummeting," "crashing" and "moribund." With nearly every column I write, I'm taken to task by readers who insist I'm being unduly pessimistic.
"Why do you at NEWSWEEK continue to try to destroy the housing market?" writes Bill T. "All you do is report news that hurts our economy [and] destroys confidence."
"All you [write] about is the foreclosure rate," writes B. C. from Colorado. "What about the rate of people NOT foreclosing who are in a home they wouldn't be in" if they hadn't obtained a subprime mortgage?
"When are the mass media going to report on housing in areas of the country where the 'bust' really hasn't occurred?" writes Tim from Oklahoma, who says prices in much of the Midwest are holding steady.
As it says in the Gospel, ask and ye shall receive. So as 2007 gives way to 2008, let's focus on the full half of the glass—and why, even amid the worst real estate recession in anyone's memory (sorry—there I go again), maybe things aren't as bad as they seem. Let us count the ways:
Some Numbers Are Strong My colleague Dan Gross recently wrote about the National Association of Realtors' history of predictions that make meteorologists look spot-on. He's right: it's always wise to treat broker happy-talk skeptically, and that includes the NAR's prediction of a housing market rebound in 2008. But amid their blarney, the realtors do make some valid points about how much is right with the economics that support the buying and selling of homes. Unemployment remains low. Interest rates remain very attractive by historic standards. It may be a less-than-stellar time to sell a house, due to extraordinarily high inventory levels, but it sure is a great time to buy one. Since many homes are bought by first-timers, who needn't worry about selling a current house before they buy one, there is a pool of buyers who should stand ready to make offers.
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