One industry that’s been hurt significantly by the recession has been construction. Near Williamsburg, VA, construction of new homes has hit a ten year low, which is partially affected by the recession and downturn in the market and also by the type and amount of work available. According to the article, the industry has been experiencing a downturn over several years in Hampton Roads, with last peak in 2004 and the lowest in 2009. Although a return to normalcy is inevitable by the way the market moves with the pace of inflation, the solution, with no new properties being construction, is to hold it out.

In terms of building specifically, many construction companies, in general, have gone out of business. Others, instead, are focusing their efforts on fixing up presold homes or remodeling them. Another similar factor is opulence. As the average price on a home is still less than it was in 2004, the demand for elaborate and customized homes in significantly less. Even those with money to spend on a home won’t contact a construction company to build something elaborate. Instead, they’ll go for a home already on the market and have it fixed up.

Of course, when building or buying a home, funding is always an issue. This means for the homeowner that getting a mortgage is significantly harder than five years ago, as credit standards are tightened. Adjustable rate mortgages targeted those whose credit was not satisfactory, and the result was too many unable to make payments when the increase started. But, as far as building a home is concerned, obtaining the funding is nearly, if not more, difficult than obtaining a mortgage. Banks, essentially unable to take care of themselves now without a government bailout, are almost unwilling to give a loan to building any more projects. With the lack of funding and the lack of need, building a new structure from the ground up is going to need to wait until the recession has taken its course.

Some say that 2010, much like 2009, will see slight increases. Others, such as Bill Watson, say that the market will be flat and a true recovery won’t occur until three or four years down the line. Watson is the founder of Watson Realty, the top-selling real estate company in northwest Florida, with 20 percent of the market. In a recent interview, Watson gave his prediction for the real estate market in general. While some say, particularly for Florida, that the real estate market will continue on a steady upswing, Watson doesn’t believe any of it. For 2010, he mentions:

• The market will be flat for the first half of 2010. Perhaps a one to two percent increase will occur.
• 2010 will experience a slight dip in the middle of the year, around April.
• Buying a home is best in the present before the first time home buyers’ tax credit program ends.
• Anyone wanting to get a mortgage will need excellent credit, as banks are still dealing with many financial troubles resulting from the past housing bust and the recession.
• The full recovery of the housing market won’t occur for another three to four years.

As we saw in many instances around Destin and the Gulf Coast, 2009 was the low point in Florida for the housing market. The year saw some dips, particularly around the middle, but the year, instead, showed steady increase. But, can that increase keep up or, for the time being, has it reached a plateau. Instead of inflated housing prices, as seen in 2003 to 2005, the market overall will probably see a standstill, instead of continuing increases. Although average home prices are lower than in 2007, the price of a house, much like everything else, should continue with the pace of inflation.

While most real estate news stories focus on the US housing bubble and bust that occurred from 2005 to the present, what about our neighbors to the north? We’ve seen real estate predictions detailing that 2010 is expected to be a steady increase from the bottom for the US housing market, but Canada might be on the verse of experiencing another real estate bubble. According to the linked article, many of the real estate practices in Canada mirror the reforms made in the US. But other risks remain, including the amount of debt most Canadians have and home prices that increased during the recession.

In the US, the main bust for the housing market was adjustable rate mortgages, or ARMs, that many got for not having satisfactory enough credit. ARMs generally started increasing after a year and, at this point, many who had bought a new home in 2005 could no longer pay their mortgages and, instead, filed for foreclosure or a short sale, as we saw in many instances around the Gulf Coast. While companies giving new homeowners ARMs were inaccurate about the assets a person had, many of the recent reforms are designed to restrict who can purchase a home to avoid ARMs.

According to the article linked above, Canadian homes are 12 percent overvalued presently, although some say they’re only 7 percent overvalued or not at all. Nevertheless, the past recession saw flat or increased prices on homes, while Canadians, much like their American neighbors, also went into debt. In fact, according to the article, the ratio of debt in Canada is 145 percent to the average income. Additionally, the Federal Finance Minister has threatened to increase down payments on mortgages. While this last statement could detract those who can’t afford a home from purchasing one, could the debt and increasing home prices set Canada up for its own real estate bubble and bust?