"There is a huge disconnect between the demographics of home buyers and agents," says Bob Moles, Chairman of Intero Real Estate Service in San Francisco and former President of Cendant's Real Estate Division. The real estate market is destined to have its bubble burst with higher mortgage rates, a downturn in home sales, an increased inventory of unsold homes and an economy headed for a recession. Supply and demand form the basic foundation of a capitalistic market. In real estate terms if an increase in home buyers and investors (including flippers and speculators) has artificially driven up demand and hence prices, then when the low-interest-rate stimulus is removed, a "correction" will occur. If the increase in demand is a result of job growth or an influx of new home buyers to the area, then the resulting home price appreciation is naturally driven, and hence there will be little or no correction if interest rates change. According to the Swanepoel Real Estate Trends Report a surge in media directed new programming at the housing market from home-repair to fix-and-flip to home-make-over shows and compounded the frenzy. Many people started looking for a "get-rich scheme" while others just didn't want to be left behind. Tens of thousands of people were pulled into real estate as it became the new "Internet Craze" where anything containing the words "home or real estate" seemed to be as hot as anything with a dot-com during the late 1990s. "More and more people are being sent to jail on charges of bank fraud and conspiracy to commit mortgage fraud, bankruptcy fraud, identity theft, money laundering and obstruction of justice," said Ralph Roberts, Time magazine's best selling Realtor in America. For example only last week nine people were arrested in Houston last week for loan fraud on roughly six schemes according to Texas attorney Charles "Chuck" Jacobus. This involved everything from phony appraisals, overpriced mobile homes to false loan information. According to Jacobus the FBI is now gearing up to start prosecuting in a big way. Many feel that adjustments on various levels, not just pricing, would be a good thing for the real estate industry. David Lereah, Chief Economist of the National Association of Realtors clearly states that "a solid price correction will bring buyers back into the market." According to Swanepoel "the industry will still has to deal with the morning after affect of: •too many agents and brokers •too many inexperienced agents •too many new mortgage brokers •a decrease in housing prices •a rise in the number of foreclosures •an increase in mortgage fraud "There are large numbers of Realtors out there who have not participated in a transaction in months or even years," says Dr. John Tuccillo, author, speaker and industry consultant with JTA and Associates. These real estate brokers and agents who have never experienced anything other than the most recent feeding frenzy this is the first time they'll be learning them, and for the rest who have "been there before", it's a time to reflect on the last time through the cycle, and add the new lessons learned. "The effects mentioned above will of course be felt differently in every region," Swanepoel says "as the impact will be regionally amplified in areas where home prices have risen sharply or had a disproportionate surge in agent count." It's not that the industry hasn't experienced any of these challenges before Swanepoel says. It's rather that the combination of all of them, including the changing consumer and advancing technology, will probably expedite the restructuring of the real estate brokerage industry. "It will take a number of years, but many of the traditional brokerages will perish and/or emerge as vastly different businesses," says Jim Sherry, President of Innovative Solutions .