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Positive Signs of Recovery in the Real Estate Industry Are Forming in the US Market

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By : Chris Marchalleck    99 or more times read
If there was one area of the economy that has taken it more on the chin from the “Great Recession” than any other, that unfortunate award would have to go to the real estate industry. The “knockout blow” goes even deeper when one realizes that real estate is one of the few professions that exists in every town, city, locale, and State in America. The disposable income provided for families, at all economic levels, is also enhanced on a broader basis than with most any other line of work as well. It is for these very reasons that the real estate industry has always been a demonstrative leader in every previous economic recovery.

Such is not the case this time around. The economic damage is so deep and ubiquitous that experts continue to ponder when if ever this industry will make headway and return to the more prosperous times of the past. Real estate may not be in the forefront this time around, but there are positive signs that are beginning to form in national statistics.

The latest figures for monthly homes sales are up on a seasonally adjusted basis, a sign that existing inventories may yet be worked off over time. While the number of homes for sale are nearly four million, this figure now represents about 8.1 months of time to work down to zero, an improvement over November of 9.5, and greatly down from the peak of 12.5 that occurred in June 2010. Homes are selling, commissions are being made, and prices have stabilized, though still below their highpoint in early 2007.

Analysts attribute these positive signs to the low-interest rate environment that continues to act as a catalyst for industry recovery. The Fed is expected to maintain this low-rate posture for some time, but only so long as inflation does not begin to gain a grip on general price indexes. However, the Fed is also pursuing a policy of Quantitative Easing that will surely weaken our Dollar. Hopefully, the weaker Dollar in forex market will encourage overseas buyers to increase their portfolio of U.S. properties, whether residential or commercial.

Commercial real estate has also taken it on the chin in a big way. The “Great Recession” eliminated nearly nine million jobs, either through cutbacks or off shoring activities. The loss of these many working people has directly impacted office vacancy levels in a negative manner. Office vacancies in better times may approximate 12%, but 18% is the norm at present. This figure will not decline until companies in our nation jump-start domestic hiring plans, an objective of the present administration, but no manner of economic policy has yet to ignite this “fuse”. Incentives, subsidies, and tax credits will have to be modified significantly to move this “needle”.

The major concern, however, is the “shadow” inventory of impending bank foreclosures. If four million is the real number, and many believe it is, than another eight months of inventory must be absorbed. Worse yet, banks are holding back on construction financing, leading to low builder confidence and the lowest new housing starts in years.

A recovery is in process, but some sectors will improve faster than others.
Chris Marchalleck is an investment enthusiast who found himself in the finance world through currency trade. Chris currently works for Forex Traders, an online resource for forex education.

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