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Okay, geniuses. I'm looking ahead past the mortgage meltdown/real estate glut.
Obviously, there are parts of the country that are Ground Zero for this problem, such as California, Las Vegas, South Florida, et. al. Look at a place such as Fort Myers where 1 house in 65 is in foreclosure, and it's really staggering.
On the other hand, there are other economically strong markets where more conservative lending guidelines prevailed and home values didn't appreciate like something from the South Sea Bubble or the Dutch Tulip Craze. In those markets, the foreclosure rate is one home in 1,500 or 2,000. And home values did not drop markedly and may have even inched up, despite a rotten real estate market elsewhere.
So my question is this. What longer-term general economic benefits will these markets derive from relative stability in their housing and lending markets, as opposed to markets that suffered through the real estate crash? I'm curious to hear your opinions. Mind you, I'm not addressing the real estate market per se, but the overall health of these cities' economies.
Interestingly enough, even though the foreclosure market is finally hitting us here, it is very localized to community/streets. And while there is that many foreclosures going on, home sales here are up 74% in june, and 87% in july since last year. I think there is something like 1.4 million units/homes between the 2 counties and still only 27,000 for sale between the 2. Very high for here, but still below the national average in an average community. during the boom there was never more than 4,000 units for sale and it was bidding wars on almost all of them. also the decline in the market was specific to homes under $500,000, above that prices are stagnent.
another thing to note is that 35% of properties owned here are investments.
economically we were in the best of markets until the housing slowed and naturally a lot of people got laid off. but its def coming back already. fort myers will be one of the first markets back and leading economically. i predict by this time next year that properties will be increasing in value again.
So far, the "Ground Zero" cities are the ones we're hearing about. What nobody is talking about yet is the fact that this credit crisis is systemic, not local. There are strong housing markets where homes are not selling quickly or for previous values, just because the banks haven't the money to lend. As soon as prices are lowered to facilitate a sale, ALL houses in that area have their prices correspondingly affected. It's like a ripple from a pebble thrown into a pond - it will keep widening and widening. It will touch everyone before it is finished. It won't be finished for a good long time yet.
Again, this is systemic, not local!
It's systemic but the severity by locality varies so greatly that some areas are (by comparison) barely affected. Most of the midwest never had the price run ups, investment property issues and resultant housing glut.
You can buy nice established (20 year old) homes in my neighborhood with about 2,700-3,400 sq ft. (not counting basements) in a good area blah blah blah....for somewhere around 250,000 give or take another 50k depending on the condition and updating.
The coasts are bearing the brunt of it (plus pockets that had boom real estate explosions)
But, more to the point, wouldn't more stable markets retain more of their wealth in a meltdown like this? And wouldn't their banks be in a stronger position to fund future growth?
I'm kind of curious about this effect.
These questions are sort of impossible to answer whole heartedly. Just as the real estate market across the country varies, so do economies. Example, lets say things get as bad as many predict, gas eventually starts its climb again, unemployment up, GDP down etc. etc.
Now lets take Stabletown USA (fictious place). Stabletown never had the R.E. bubble but its heavily dependent on tourism because it has the worlds first widget. Well, if people aren't travelling as much and as unemployment reaches the double digits, that means what? Less revenue for stabletown, means unemployment will rise and the effects go on and on.
As someone else pointed out too, liquidity is a issue right now. All banks are affected in some way or the other. Also we are starting to see commercial R.E. delequencies and defaults. I point that out to say, this situation goes beyond simple R.E.
The heart of the problem is a economy (the U.S. national economy) that is based on Finance, Insurance, and Real Estate. These are all based on credit/debt creation. In fact our money supply is partly created via debt creation, how stupid is that? This is something which long term is not sustainable. So we have a national issue, some cities/states will fair better than others during this transition period but that will depend on the diversity of said economies.
I heard that Denver Co. has a very diverse economy (I have not researched this myself, just stating what I heard). So for them, they may do much better than other places, though there will be some slow down and affects from all this.
I think the better question would be to ask yourself, which cities you think will benefit from the new direction the economy will take in the next decade. Well, I guess the first thing to ask is what will the transition from the F.I.R.E. economy be to? Then which states/cities are in the best position to take full advantage of this new economy. When thinking of these questions, don't think two years out or three years. this transition will probably take a decade or so to fully materialize.
Sorry I couldn't be more pointed in my response but it takes a lot of thinking and research to come up with a clear idea of how things will pan out.
Areas least affected, like Charlotte NC, will have a local economic benefit in that citizens there have not lost so much equity in their biggest liability - their house. This percieved stability will sustain consumer confidance and spending.
As far as banks go, lending can be done from anywhere by large institutions and I doubt very many lenders in Charlotte did not have sub-prime exposure in hard hit markets like Florida. It's a global economy and the backlash from shoddy underwriting on top of the cyclical credit contraction is going to tighten money supply everywhere. As they always said, "cash is king."
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