Economic recovery tied to real estate

The daily newspaper here in Wichita yesterday brazenly reported that the recession may be soon

over sighting the most recent news about housing starts and and housing in general. Many economists

and analysts believe the recovery rests on the shoulders of the housing industry. Great! No more

worries and we can now get back to the business of commerce.

It is true that the US turned in some really impressive numbers concerning housing lately. Most

recently housing starts were up. There's lots of buying activity out there considering the state of the rest

of the economy. The question is what is driving it.

Money is what's driving it. Government money to be exact. As most everyone knows by now the

$8000 tax credit that the Obama administration has enacted for first time homebuyers ends Dec. 1st.

First time home buyers have to be closed no later than Nov.30.

It takes 4 or 5 sometimes 6 months on average to build a house these days. Of course the smaller the

home the faster it goes up. That leaves about 5-6 months from when the last stats began to be gathered.

Just enough time to put a new house.

Resale stats may still stay strong as we finish out the year, at least until the middle of October or so.

A contract signed at the end of October will be pushing the limits to get closed by November 30,

especially with all the new changes that have come about recently.

So, is the recession ending soon? That is the question. No one really knows what's going to happen

to the residential real estate market once the incentives to buy dry up. Will people continue to buy?

Who knows. The best that can happen is for the tax credits to be extended in order to keep this

momentum going and to build on it.

The economy is counting on the real estate industry. So how do feel now. Empowered?

Real estate agents and brokers are going to have to come up with ideas and incentives of their own

to drive business. With out the low prices, low interest rates and tax incentives this recovery could

stall, and that would certainly be bad for real estate and for the economy. Prices and interest rates are

not likely to rise anytime soon, unless there is suddenly a huge influx of buying.

It is essential for consumers to continue to buy homes. Both new homes and resale homes. New

home inventories are dropping and builders are building again, for now. The foreclosure rates are still

alarmingly high, but banks are selling some already foreclosed on homes too. If the steam can stay

behind this recovery an equilibrium will soon be reached in the foreclosure market.

The next problem for the housing industry will be inflation. After the economy regains it's feet, the

over supply of money in the market will take it's toll. At some point there will be a rush to buy real

estate before, or even as, prices and interest rates begin to rise. It may be impossible to predict when

that will happen, but it will.