Real Estate in Todays Economy

It is estimated that in 2010 there were nearly five million American homeowners who were past due by at least 90 days on their mortgages. According to Mortgage Bankers Association, there were 1.2 million homes lost to recession between 2005 and 2008.

The panic of 2008 was of course brought on by the increase in foreclosures. Banks and traditional lending companies were hit hard and many were forced to close their doors. This brought on a decreased trust in the banking system overall. The economy was virtually brought to a standstill.

These numbers appear to be leveling out, but they have certainly left a path of destruction in their wake. The one time sense of security that came with home ownership became a thing of the past for most. Can the average American recover from this with some semblance of financial stability intact?

Since real estate makes up over 10% of our average economic output, the decline in real estate sales creates a ripple effect in the rest of the economy. When new homes are not being constructed, this has a bearing on unemployment rates. Homes already in existence lose their value and this has an impact on equity loans. All of this creates a decline in overall spending it is a vicious cycle.

The price of undeveloped land has increased. An acre of undeveloped rural land a mere thirty years ago could be purchased for as little as $500. That has escalated to upwards of $10,000 depending on location. A prime piece of real estate for developmental purposes can garnish a hefty $100,000 per acre.

Another factor in today's real estate market is the property tax assessed. Not only is the fair market value of real property taken into account, but the taxing jurisdiction basis the tax levy on that jurisdictions budgeting allowance. The jurisdiction can be the city, county or school district that the property is inside of the district.

As the fair market value of real property decreases, this will alter the budgeting allowances for the given jurisdiction. For example; if the property is within the jurisdiction of a school district, the school has to adjust their budget based on the overall economy. The school's budget may not have adequate money to provide supplies or salaries, therefore the property tax will be increased to compensate for the school budget shortfall.

Clearly, the economy as it relates to real estate is a complex issue with no quick fix. It took time for the housing market to get in dire straits and assuredly it will take time for the problem to be resolved. Hopefully in time, future generations will once again come to know the security in property ownership.