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Where Is Housing Going?

25 March 2010 2 Comments

Housing is potentially about to suffer a slowdown in its recovery or a full-fledged double dip.  The problem is that there are a few factors working against a sustained recovery in housing.

First, The Federal Reserve’s monetization of mortgage backed securities is set to end at the end of March.  Most believe this will cause mortgage rates to go up since the monetization of these securities has kept rates down.  Pretty straight forward here.  Higher rates hurts the housing market.

As a recent Yahoo! Tech Ticker article (video below) discussed, there is a potential mass glut of supply that some call the “shadow inventory”.  Basically, the official numbers of the houses for sale typically don’t factor in the millions of homes going through or about to go through the foreclosure process.  The Zillow economist in the below video estimates this to be somewhere around 10 million homes!  Yikes.

Put it together and housing is likely to take years to stabilize/rebound.  I look at this way.  The bubble grew over a period of many years, so it’s likely to require many years to unwind.  I just don’t think we’re there yet.  If you’re looking to buy, there’s no rush in my opinion.

2 Comments »

  • UptownDenver said:

    I'm not as worried about the buyers. If you have the $$ to spend up front I still think it's a good time to lock in a 5% rate and buy some hold and rent investment property. I'm more concerned about the yield on the 10 yr note. If that sucker goes up too much all those variable rates are going to go up with it and we'll see a whole new rash of foreclosures.

  • 20smoney said:

    I see your point, but where are the buyers going to come from? We've done everything possible for years to find every buyer imaginable through horrific lending practices and now government incentives. There are no new buyers. and when it comes to people who own a house turning into a buyer, they have to SAVE MONEY to sell their house assuming they even find a buyer. Then, yes, throw in higher rates and housing is going nowhere.

    Just my opinion 🙂