In the last several years, prices in many real estate markets have gone up dramatically. Many home-owners have seen double-digit gains on their homes for several years in a row, and prices just seemed to keep going up and up. Credit was offered to those who really couldn’t afford homes, and others threw everything they had into the real estate market, and prices just kept on going up. Eventually, the real estate market hit a place where the price of a home was out of reach for many would-be real estate buyers. The rapid price increases disappeared, many people became threatened by foreclosure, and others realized they didn’t make a good investment and lost a significant mount of money.

For the first time since the federal government started keeping records in 1950, the median price for a home has actually declined. Many analysts believe that home prices will continue to decrease in 2008 and go even lower in 2009. There are some real estate markets that are still increasing, such as Charlotte, Seattle and Portland, but most of the “bubble markets,” including Boston, Florida, and Washington D.C. are hurting quite a bit. New York Metro is about the only boom market that hasn’t felt the pinch of a declining real estate market yet.

The average price of a home likely will decline by about 1% or 2% annually for the next few years. If you own a home now, you have absolutely nothing to fear if you have no intention of moving or selling your home in the next few years. Even though, there will be a substantial increase in the foreclosure rate in the next few years. The silver lining in this situation is that most of the foreclosures are not families that are going to be put out on the street. Most of the foreclosure will occur on speculative investors, many who have never actually seen the home that they’re losing.

In the end, the housing correction we’re seeing will actually be quite healthy for the country, because it will move the country back to a place where home prices are more affordable for the average person. If the bubble were to continue, many residents would have to pay outrageous real estate prices similar to what California residents have been paying for the last couple of decades. Home prices are far higher relative to the average income in that market, making real estate purchases out of the question for many would-be homebuyers. When real estate prices become more reasonable again and we see steady and reasonable increases, as opposed to double-digit bubble increases, a typical family will be more likely to be able to afford a home and speculative real estate investors will put their money elsewhere.



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