The moment you have a slow down in the real estate market you begin to realize the vital role played by real estate investors. As the name suggests real estate investors are there to invest in the market which means they go to great lengths to do their research and they take greater risks than ordinary buyers and sellers precisely because they are creative in the way they buy and sell property and are able to find both buyers and sellers in the most unlikely areas.
When the market is gridlocked due to either overheating (which causes many problems in its own right) or a real estate slump (when prices begin to fall and house buyers are cautious) real estate investors provide a much needed catalyst. They are willing to do the work necessary to find properties which are locked into the market through foreclosures and release them creating an upward and onwards movement within it which benefits everyone involved in real estate.
The assumption is that usually only realtors and lenders can benefit from real estate. In fact there is an entire peripheral industry depending on it and the services within it range from DIY stores to home furnishings and furniture stores.
In truth, real estate, drives a huge chunk of our economy and the recent global crunch in credit and the rockiness we witnessed in the markets was a direct result of lack of faith in the value of existing mortgages which led to a withdrawal of available credit between banks which in turn reduced the amount of money that was available to be loaned to borrowers and that, caused a tremendous upheaval in the market and a wave of foreclosures which, quite frankly, should never have seen the light of day.
Throughout all this real estate investors managed to find houses, find buyers, find finance and close deals. Admittedly the work was harder and the margins slimmer than ever but they did it and it kept the real estate market afloat long enough for banks to rally and come up with a global finance rescue plan for the lending institutions which were facing difficulties and that led to a revitalizing of the real estate market.
The temptation here is strong to think that we are now out of the woods. With more money than before available for them to borrow banks should be able to loan money but now that the question of liquidity is solved the question of solvency is beginning to raise its head.
Solvency is a much more serious issue than liquidity and if it proves to be a problem it will put the real estate market back to the doldrums it was in for much of 2007.
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