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Effects of Housing Industry Slowdown

How deep and how fast?

 

By Namneet Dhaliwal

Orange County Realtor

December 20, 2006

 

 One may see the effects of housing slow down on the surface as being a shift to the slower sales and some shift in the pricing. Actual effects are deeper and if the slowdown persists through year 2007; this depth will become very obvious.

          After the dot com bust in 2001 our economy was fueled by housing market. It created a large number of jobs from realtors to brokers, from loan officer to lending companies, from handymen to contractors. A tremendous out pour of money in remodeling increased sales at the building warehouses. This brought a new form of old economy, real-estate offices opened just like star bucks on every corner, every 50th person in California became realtor, and influx of sub prime lenders generated jobs and money. Due to abundance of money available thorough different financial plans, home owners dug deeper into their pockets and flooded that money back into the economy. Realtor paid humpty some of money to different lead generating companies, as more leads one got more money it brought or if it did not generate the income, income was enough to take it as a tax deduction. Real Estate Boom became the economic boom after dotcom crash.

 

          If this fuel continues to dry down in 2007 it will influence different segments with same results: slowdown. Sub prime lenders could be the hardest hit, when a 100% mortgage of 80 – 20 loans goes into default, there would be no money to cover the realtor’s cost and sales cost, so the second with 20 percent is going to suffer the damage and many lending companies could go out of the business effecting every one employed by them. Lack of money could reduce the remodeling projects effecting laborers, contractors and the store sales which sell the materials for such projects. Many realtors, loan officers and other related to the field would have to go out there to find a traditional job to make ends meet, unless they have reserves. This could change the unemployment rates in the nation.

 

          Decreased number sales could effect all above and the ones who depend upon the above including the suppliers and factory workers related to housing industry. Even during the normal pace of sales volume some people would have to exit the industry, as pie will not be as big to share as it has been during the boom. If this trend continues for another six months to a year, slow down of housing industry could shift into a slow down of economy.

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