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Housing Isn’t Going To Rebound

2 March 2010 10 Comments

January housing numbers have been pretty terrible.  Recent articles discuss the “unexpected” downturn in home sales:

With that said, I don’t really pay too much attention to month by month numbers.  That goes for any economic indicator.  For example, are we really suprised to the upside and downside every thursday morning with jobless claims numbers?  It’s ridiculous.

I’m bearish on housing because I take a step back and look at it from a high level.  What I see is that home buyers a finite supply.  We pulled out every stop conceivable to increase that pool of buyers.  During the boom, it was horrible lending standards, and during the bust, it was government paying people to buy homes.  The reality is that there just aren’t any new buyers.  Unless government starts putting down a 20% deposit for new buyers (isn’t unreasonable), then I just can’t see how we get an influx of buying in order to boost home values.  Factor in the enormous supply and foreclosures happening, and housing is not going to rebound.

Look, I own a home.  I want my value to shoot through the roof, but I am not naive enough to think that “the market is going to turn around” just because all markets turn around.  Maybe real estate peaked a couple years ago for decades or forever?

Oh yeah, we haven’t even mentioned the idea of higher interest rates either, which will happen eventually.  How will that impact housing?  Duh.

Do you disagree with me?  I’d love to hear your thoughts and reasoning for why housing is going to rebound (honestly!).

10 Comments »

  • Ted @broketofree said:

    Ugh, we are hoping to sell our house in the 2-3 years (getting crowded). I am just hoping that we can get out of it without having to pay anything. Right now, our value is at the exact same spot we bought it for 4 years ago. But we can pay the mortgage and I am not forced to move so we can wait and see. I do think if we focus on the every month numbers, we can be mislead. It is all about what you need to do right now and what is going on in your neighborhood.

  • bob said:

    Buffett Says U.S. Housing Will Recover by Next Year
    http://www.bloomberg.com/apps/news?pid=20601068&a

  • Strick said:

    I own a home and would love values to drop like a rock, I'm getting tired of high property taxes and a lower valuation would be great! Can't think of any reasons why I would want the value to go up, as it wouldn't mean anything more than I could risk my house for more debt. I wouldn't want my home value to drop drastically in comparison to other homes just in case I want to move some day, but if it fell along with the rest of the market, why not.

  • LeanLifeCoach said:

    Personally, I think Buffett may be a little too optimistic, but I think saying that housing will not rebound is not being realistic. Relatively speaking its hard to see any significant improvement in housing in the few years but our population continues to grow. Eventually there will be a better balance between supply and demand and prices will begin to appreciate again. We may not know when but I don't think there is an if.

  • 20smoney said:

    Sure, I mean given a LONG enough time line, it's definitely likely. But what are you getting at you think? 5 years? 10 years? 25 years? At what point is it not dead money?

    Thanks for the comments!

  • Nile said:

    I think a true rebound is not finding us at the highs of 2007 but the ending of home prices dropping. As that definition goes, I would be more likely to agree with Mr. Buffet on this one. They don't call him the Oracle for nothing!

  • Daddy Paul said:

    I disagree with you that housing is not going to rebound. I once lived in a mining community where the mine had closed. You could buy any home for less than $1000 in some cases less than $100. This was 1965. In the next ten years home prices had rebounded ten fold. I don’t think that is quite what you see today but close. With all of the abandoned homes here in Michigan a buyer can name his price. I say you double your money in the next four years.
    High end property will not do as well. As interest rates rise the number of potenetal buyers will fall and the property values will remain depressed.

  • Money Beagle said:

    Great post. The housing market holds great interest for me. I typed up a response to this and realized it was way too wordy to justify leaving a comment, so I actually responded via a post on my blog. I tried to include some interesting points to consider, and I sort of focused on the differences between renting and buying and why I think there's some built in advantages to buying that will help housing along over time. I agree that we're never going to 'recover' to the heyday, but I think there's still hope to make home buying an attractive option. Check it out if you get a chance.

  • essays said:

    I just hope that we can get out of it without having to pay anything. Relatively speaking it is difficult to see a significant increase in housing in recent years, but our population continues to grow. I agree that we will never be 'back' to the heyday, but I think there is still hope to make home buying an attractive option.