This is the first post in a series that looks at the current and past real estate market cycles.
The current cycle is starting to look somewhat like a 12 step program:
Step 1-Awareness of the subprime problem in late 2006
Step 2-Credit markets froze in July of 2007, which forced the Federal Reserve to step in.
Step 3-Losses start to hit at Citibank, Bank of America, Merrill Lynch and many others.
Step 4-Yet to come, but could be worst of it, accentuated by job losses, lower retail sales and housing foreclosures.
Step 5-12 Recovery?
Steps 4 and 5-12 are based on some speculation, but I think these might be close to the mark, at least at a national level. Keep in mind that local real estate markets will always behave somewhat differently depending on their demographics, local economies, availability and affordability of homes, just to name a few important factors.
In looking back at this last cycle it's apparent that "easy" money, questionable loan practices, a friendly interest rate environment, little oversight and finally greed were the main culprits. This set of ingredients helped fuel the feeding frenzy for housing, not just by folks who should not have been buying from an affordability perspective, but also the many investors who took advantage of these circumstances in order to "flip" properties.
I'm looking forward to reading this series of posts! The recovery process is going to be a steady one. Even when we're fully recovered, I doubt we'll go to the easy lending practices of the past.
You shouldn't stretch yourself thin to own a home; it should be affordable. Before, whether they were affordable or not, the market was just giving them away.
Ana:
Sure, its cyclical. We haven't started the recovery phase yet.