In the old days, the real estate industry, at its heart, was very simple. Houses were built, houses were bought, houses were sold. When there was a greater demand than supply, more houses were built and the cycle continued. It was one of the country’s economic cornerstones.
Today, with the economic recession still holding tight, the cycle is all but nonexistent. Homes are being foreclosed upon, sold at a fraction of their worth, and there isn’t enough capital to invest in new properties, let alone finding people in the economic situation to buy them. REOs and short sales are the norm.
As a side effect of the battered real estate economy, homes that are being appraised are being unfairly compared to the sale prices around them – sale prices that are way below market value. But it’s a vicious cycle that has no end in sight. One house is being appraised low and sold low, and the similar house next door is appraised low, and the house next door to that, and so on and so on.
Industry insiders were hoping that new home construction might help jump-start the buying-selling cycle, but with the glut of foreclosed homes on the market, why would anyone pay full price for a new construction?
What’s the solution? Right now, there isn’t one. Like the rest of the sectors of the economy, the real estate industry will just have to wait.
