What is the true value of real estate, and how do you know what your house is really worth?

More importantly, is the value of real estate going up or down right now?

Coming to terms with the current real estate market can prove difficult for many people.

The overall value of our homes seems to be on a steady decline with no signs of reaching bottom any time soon, especially not in the year 2011, with so many potential problems still looming.

National issues that have largely impacted the real estate market in a negative manner, such as foreclosures, strategic defaults, and tighter lending standards, will remain a threat in 2011 and beyond.

Interest rates and taxes also present a threat. Should they start to rise, the real estate market could be negatively impacted further.

On a local level, New Jersey's unemployment rate still remains higher than the national average, and Pennsylvania is poised to become the third largest casino market in the United States next year. This can have a detrimental effect on Atlantic City's casino industry, which in many ways contributes greatly to our local real estate market, particularly in Galloway Township.

Of all the forms of toxic mortgages, none are more predictable then the ever-unpopular adjustable rate mortgages, also known as ARMs. These loans typically have interest-only teaser rates for a set number of years. Then the interest rate jumps to what it should have been, and principal and back-principal all become due at once.

Basically, it's easy to tell when these loans are going to go belly-up, become delinquent and sell as foreclosed homes. They are the 10-year ARMs from 2001, the seven-year ARMs from 2004, the five-year ARMs from 2006 and a few three-year ARMs from 2008. This is in addition to the four waves of ARMs that reset in the year 2010.

Altogether, that's eight waves of ARMs resetting in just two short years, which is going to pile foreclosed homes into a market that's already heavily saturated with bank-owned properties. As these types of properties continue to sell for less than what would normally be considered fair market value, it will continue to pull down the value of real estate.

With new changes come new strategies. Unfortunately, one new strategy becoming widely known in America as strategic default could become the final nail in the coffin of our struggling real estate market. What makes this method so dangerous is that it appeals to all homeowners who owe more than their house is worth whether they are delinquent or not.

This means that homeowners are strategically planning to allow their current residence to get foreclosed on so that the loan may be forgiven, which frees them up to go buy a similar, or maybe nicer, house at the current market's cheaper prices. In certain markets across the country, this strategy is saving homeowners hundreds of thousands of dollars, even saving upward of half a million or more, after considering the difference in interest that would have been paid back on the larger loan versus the new smaller loan.

As the number of homes going into foreclosure increases, the financial industry has no choice but to continue tightening its lending standards. This requires higher credit scores, better credit reports, larger down payments, increased fees, higher insurance premiums and much more in order to qualify for a mortgage.

Higher standards will further limit the pool of potential homebuyers, since many will no longer qualify for the loans they would have applied for. Either way, it will drive down prices of homes, whether it's so a buyer can qualify for the mortgage, or just to make one's home more attractive than others to the few remaining buyers that are out there.

Interest rates have been historically low for some time now and will have to rise inevitably. When they do, the price of real estate falls. The financial institutions will still make out regardless.

For instance, the interest paid back on a $200,000 mortgage at 5 percent is the same on a $161,000 mortgage at 6 percent. On both, loans the banks make $186,500 in interest off their customer. The only winners here are going to be the cash investors that have been patiently standing by, waiting for prices to reach rock bottom.

Without being able to add significant jobs to New Jersey's workforce, the unemployment rate will remain high. For people who are out of work, the last thing on their mind is purchasing a home. For those who are already homeowners, they may be in danger of losing their homes if they can no longer afford the payments.

Many people have had to take new jobs making less money than they were at their previous place of employment. In any case, it's a no-win situation for the real estate market.

Much of Atlantic City's business has come from the state of Pennsylvania, thanks to the Atlantic City Expressway. Now that Pennsylvania has its own booming casino industry, Atlantic City has seen a decline in business, and has had to make cut backs in order to deal with the losses.

It has cut back jobs, and even stopped work on some new casino projects. Many people in our area who work in the casino industry are trying to get jobs in the casinos in Pennsylvania; ultimately they will end up moving to that state or at least moving closer to it somewhere in Camden or Gloucester counties.

This equates to having more homes for sale and fewer homebuyers in our area. The simple laws of supply and demand in this case lead us to believe that our real estate market will continue to decline in value.

It's not all bad news, though.

There are still many people who would love to become homeowners, and for them, it's great to see real estate will once again become affordable. It's great to see people purchase homes that won't emotionally or financially drain them and their families, as it has this past decade. People will again be able to afford homes that are large enough to accommodate the size of their families, save for their futures, and start putting money away for retirement and college educations again.