Inman News said Tuesday, October 7 that the real estate industry will have to rethink market fundamentals and the long-held demographic and economic beliefs the experts argued would drive the housing demand into the future. The new analysis focuses on long-term value, not short-term appreciation.

In an excerpt from the Inman News article, the former housing bubble was attributed to six “market fundamentals” listed as the mantra for the industry for more than a decade.

• The demographics-as-destiny argument. The expanding U.S. population -- immigration -- would fuel real estate demand well into the next decade.
• Low mortgage rates. Cheap credit would keep home loans affordable.
• Boomer wealth. Prosperity and the rolling over of assets from the Depression generation to the spending generation would continue to ignite home purchases.
• Consumer confidence. At the 2003 conference, Yale professor Robert Shiller of the Case-Shiller home-price index argued that historic bubbles did not burst until consumers gave up on the asset that prompted their confidence. At the time, real estate enthusiasm was as strong as the morning Starbucks coffee habit.
• Low unemployment. The argument was that people who are employed buy houses.
• Unlimited market liquidity. Access to capital seemed unrestrained as Fannie, Freddie and the mortgage-backed securities market was flush with funds.

Now that the bubble has burst, these fundamentals have become a moot point. As Inman explains –

The demographic wind is gone, as immigrants are less drawn to the United States because of our economic demise and our overbearing border constraints.

Mortgage rates are low, but artificially cheap home loans are gone and super tight credit makes it difficult for even the most worthy borrowers to take advantage of low rates. And the secondary market has been downsized beyond anyone's imagination.

Boomer wealth is shrinking every day as home and stock equity evaporates. The tables have turned on the lucky generation. Plus, record levels of debt reduce the net worth of the average boomer's personal balance sheet.

Consumer real estate confidence is waning as homeowners witness record losses in their home equity.

Still, under a new set of fundamental principals based on long-term value rather than shot-term appreciation, real estate sales may slow, but the housing market will become more stable.  There are still benefits to home ownership, not least of which is building savings over time while keeping housing costs predictable.

To evaluate your current real estate situation, North Georgia homeowners and buyers can contact EXIT 1st Choice Realty at (770) 886-8861.

Forsyth County Classifieds: housing market, Real Estate