All of the news about real estate these days from CNN, Bloomberg, our local news outlets, and even our friends, neighbors, and local real estate professionals is pretty much bad. Apparently there is a mortgage crisis, new housing sales are down by scary margins, existing home sales are fewer than in several years, a larger percentage of homeowners are late on their mortgage payments, and foreclosures are up. The spin-off bad news is that people are losing their jobs; mortgage companies are laying off, manufactured housing plants are laying off and closing, car and retail sales are down, lumber and building materials sales are down, furniture and appliance sales are down and the economy in general is in a slump.

When asked "What do you think it means?", I have come to the following conclusions:

1. Real estate and housing are a gigantic factor in the success or failure of our national, state and local economy and when things go bad in housing, every single other industry is affected. A home is most people's largest single investment and when its value begins to decrease, even though a home's market value can be abstract in concept, the real dollar implications of that decrease manifest themselves everywhere.
2. This is not the first time in my memory (which is admittedly a long one) that we have seen these exact symptoms in the housing market. Those of us old enough to remember the housing slumps/recessions of 1974, 1982, 1989, 1997 and now 2007/8 know in our hearts that all markets, including the housing market, are cyclical.
3. Generally speaking, all but the most sophisticated investors think with their hearts and not with their heads when it comes to their home, where their children have been raised or are being raised, or will ultimately be raised. Everyone wants the very best for their children, their family and themselves and are willing to accept risk to get it. Unfortunately, not every home owner clearly understands what the risks are, what's at stake, and how best to mitigate the risks.
4. While there are always plenty of scapegoats when things go bad, in the end it is the property owners themselves that are at fault for making bad choices when it comes to real estate investment. Having said that, of course, the lenders, the government, the regulators and lots of others have a piece of the blame, but you have to admit that nobody put a gun to the head of any individual and forced them to borrow more than they could pay back in order to purchase property and nobody forced property owners to continue to refinance all of the equity out of their holdings beyond their ability to repay either. Put simply, many folks were gambling and they lost. The "Last Sucker Theory of Real Estate Investment" has played itself out again with the exact same result as it has always had.

But - enough with the bad news!! Let's get to the good news. We'll touch on the favorable aspects of our current market conditions in the next installment.