Real Estate is Back

Alec Shklyar, Real EstateIn the wake of the 2008 recession and the housing market’s collapse, millions of Americans were subject to foreclosures and penalized credit reports. Seven years ago, foreclosed home rates reached their peak, and now, those impacted credit scores are finally beginning to fade. What does this mean? Well, for one, it means more Americans can finally start improving their credit scores again, which means the housing sector has the chance to benefit enormously.

Ralph MacLaughlin, Chief Economist at real estate search engine, Trulia, puts two and two together, “Improving credit scores might entice households to start borrowing more in general.” This means that the housing market is increasing exponentially because there are many more prospective consumers. Not to mention, interest rates are much lower than traditional standards because of the significant reduction in activity since 2008.

So, decreased interest rates and more able consumers spell great news for the real estate industry at large. Additionally, there have been sustained gains in employment as well, along with bigger increases in pay, which gives prospective consumers even more capital with which to purchase homes and thus increase the housing sector as a whole.

Now, while this all makes crystal clear sense in theory, the numbers are a bit more difficult to quantify. What we do know for sure is that the number of consumers with a new foreclosure added to their credit reports reached a record-high in 2009 at 566,000. According to the three major players in consumer credit scores and reports, Experian Plc, Equifax Inc., and Transunion, foreclosures and short-sales (when a home is sold for less than what’s owed on it) usually roll off these negative reports seven years later. Considering it’s 2016 and the peak happened in 2009, that roll-off would happen right about…now.

This should manifest itself in a stronger demand for homes, which could mean higher spending on durable goods like appliances and furniture. Just as well, formerly afflicted consumers may also feel more comfortable applying for new credit cards, auto loans, and other various loans, which, overall, is good news for the economy (so long as the loans are responsibly approved). This credit repair could feasibly in and of itself aid people in repairing their financial standing by then reducing their borrowing costs, which would ideally free up money that could be used to further general consumption.

I suppose, to put it frankly, real estate is back. Interest rates are low; and I expect we will see a surge in homeownership very, very soon.