Oct
07

Will the global credit crunch hurt Texas Real Estate?

Money really makes the world go round and this is no different in Real Estate. The global credit crunch that many analysts fear is about to start influencing many different sectors of the economy.

The result is that there is a generally tense atmosphere when it comes to lenders and their willingness to be lenient and this has led to both a tightening of available credit and an increase in foreclosures.

Money really makes the world go round and this is no different in Real Estate. The global credit crunch that many analysts fear is about to start influencing many different sectors of the economy.

The result is that there is a generally tense atmosphere when it comes to lenders and their willingness to be lenient and this has led to both a tightening of available credit and an increase in foreclosures.

The fear is now that the real estate bubble is about to burst and that Texas Real Estate will be a victim alongside regional real estate everywhere. The case however is patently not so and here are the reasons:

1. The boom and bust cycle of real estate markets is a thing of the 20th century. It happened in the 70s and then the 80s when hyper-inflated property values would fall leaving home owners saddled with negative equity. The real estate market today has risen on a gradual, realistic basis and this has truer in Texas and Texas land more than anywhere and any fluctuations we are experiencing are the direct result of an adjustment.

2. The real estate boom we have been experiencing in Texas has been directly linked to home owners and Texas land buyers’ ability to tap into affordable credit. This has, unfortunately, included the sub-prime mortgage market where, as we now know, there is a crisis with higher interest rates hurting home owners and a rise in foreclosures as a result of defaulting home buyers. However, the blame of much of this exposure can be laid directly at the feet of lenders themselves, many of which engaged in unscrupulous lending practises and non-transparent charging structures. The US Government, under President Bush, some members of Congress and no fewer than 37 top State Prosecutors have come out on the side of home buyers, pressuring lenders to be a little more willing to open communication lines and a little less eager to jump on the foreclosure bandwagon so things, in that area, are going to get much better.

3. While foreclosures are at a 50 year high across the continental United States home ownership is also at a record high and it can be argued one is a reflective and perhaps natural percentage of the other.

4. Home foreclosures are also a natural part of the real estate market allowing first time buyers to get a foothold on the Texas property ladder at a higher level than they would normally be able to.

All of these facts bring us to the burning question: is the Texas Real Estate scene about to go bust? Logically I’d say no. The facts so far indicate a slow down which will bring a market correction in terms of house prices, will allow first time buyers in Texas looking for a ranch, a home or even a recreational property to snap up a bargain and prices will then rise again as confidence returns to the market for buyers, lenders and investors.

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