Real Estate Buzz Words

Difference Between Stabilization and Recovery

You hear both words tossed around quite a bit. Sometimes the real estate market is stabilizing; sometimes the real estate market is recovering. I plead guilty as charged myself.

Before the words become so overused (possibly due to so many trying to will them into existence for our housing market) that they cease to lose their meanings, it may be a healthy exercise to step back briefly and make sure we all agree on the distinction between the two.

Opportunity:

Stabilization, in the context it has been used most often this summer regarding real estate, refers to the fact that many analysts agree that the market is no longer a runaway doomsday train. The worsening is lessening, if you will. Not only have many indicators improved in percentage drops, some have even pushed their way modestly positive.

Recovery, on the other hand, is something a bit more than stabilization, and it is important not to get into the habit of using the two words interchangeably. Some fudge the difference by saying the recovery has begun, but that implies some knowledge of a future that still appears relatively murky to the rest of us. It could be that a recovery has begun, but that will be labeled best by historians, long after the time has passed.

A sustained recovery has several roadblocks yet to be cleared. Unemployment needs to harnessed and controlled. Alt-A mortgages and the entire underwater epidemic threaten to plunge the market back into a foreclosure frenzy. If that happens, cue more bloated inventory and price deflation. If confidence remains high, though, and unemployment and foreclosures turn out lighter than expected, the full recovery could finally begin, possibly as soon as next year. Plan accordingly.

Real Estate Buzz Words