On Wednesday some of my colleagues and I went to hear a speech given by Carol Rodoni. Carol Rodini was the President and CEO of Alain Pinel Realtors, and is now a Real Estate Consultant.
Part of understanding where we are in today's Real Estate Market is understanding where we have been.
In the year 2000 there was a great crash in the stock market when the tech sector blew up. Many saw reductions in stock values of up to 50%. Money fled the stock market, and found a new home in Real Estate. At the same time the government opened up the loan process and the Fed made it easier for the average American to leverage their way into home ownership. This was done by lowering interest rates, and allowing for more creative loan packages, i.e. adjustable rate mortgages, zero down payments, no documentation loans, etc.
Home ownership zoomed from 50% of the population to 70%. Renters became Buyers and the Real Estate Market started to heat up rapidly.
Buying Real Estate became not just a way to find a home, but rather a way for the average American to leverage wealth. With 20% yearly growth in Real Estate values from 2000 - 2005, speculative property buying began to take over the market, which lead into even more hyper growth in Real Estate values.
In my next post I will write about where this has lead us, and where we are going.
