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Housing Is Not Coming Back Soon

31 March 2011 21 Comments

We have a long way to go in housing.  It’s interesting to me that the ones who speculate that housing will improve soon and the end is near don’t have any reasons for it.  Instead, they just figure it’s been long enough of a decline, and thus, the decline must be over soon.  How could it keep going?

Unfortunately, this type of analysis while it might make sense on the surface doesn’t really hold up and doesn’t really mean anything at all.

On the other hand, the folks that look at the actual data for the most part acknowledge that housing is still declining and will continue to do so for a while.

There are some interesting data points I’ve seen recently including:

  1. 17.5% of homes in Florida (my state) are vacant – that is what you call a glut of supply
  2. Average time of not making payments for those going through a foreclosure is over 18 months.  Yes, 18 months of not paying one’s mortgage
  3. New home sales hit an all time low recently

If you start looking at anecdotal evidence, the only people I know considering purchasing a home are the recent college graduates / 20-somethings who are looking to get their first home.  Anybody who is already in a home is either staying put, or trying to get out of their house.  Trying to get out of their current house either takes the shape of a strategic default (stop making payments) or a short sale.  Nobody I know my age is able to get out from their home without taking a hit.

You need much more than some 20-somethings entering the housing market to boost this market.  First of all, this impact is negated somewhat by those exiting the market (retirees, death, etc.).  Second of all, the recent college graduates aren’t exactly a booming demographic right now as there are record graduates that are living at home and record graduates struggling to find full time work post-college.

Trust me.  We have years left to unwind this real estate boom that happened a few years back.  Be patient and hoard capital.  There will be a time to buy/invest at some point.  But, we’re definitely not there yet.  Patience, patience, patience.

21 Comments »

  • JayBandit said:

    Hi, I've been reading your site for a while, and I enjoy it a lot.

    FYI – Those "vacancy" numbers are very misleading. They consider any home that is not a primary residence to be "vacant". But, that means that the plethora of vacation homes, 2nd homes, homes being remodeled, etc. are all considered "vacant" even though they're paid for and empty by choice, not by the market. It makes sense that in a place like Florida or Arizona those numbers would be significantly higher than in the average state across America. CNNMoney had an article about this, and they showed that the average true vacancy rate is more like 5-6%, with a bit of fluctuation from area to area.

  • Money Beagle said:

    It's going to take a long time and a few shifts in mindset to get us in what I would consider a stable housing market. I think it will happen though, just not for a few years. Meanwhile, one thing I hope does NOT happen is any further government intervention or stimulus. We don't need any more band-aids, and frankly we can't afford them right now anyways!

  • exchangerates said:

    the only problem in kenya is the fact that the government does not control how money comes in kenya thus the money coming from all sources enters in kenya and is cleaned. thats the only problem otherwise, the prices would be reasonable. a house in nairobi is more expensive than a house in LA (USA)thats not economically sound.

  • Dave M said:

    Federal regulators proposed new rules this week that won't make things any better for housing. It will make it more costly for anyone without a 20% down payment. I think these new proposed rules would be good to keep people out of houses that they probably couldn't afford one in the first place. However, it surely isn't going to help improve all of the empty houses throughout the country. There will be less eligible buyers and an over supply of houses.

  • Guest said:

    Seems like interest rates are creeping up. Would you refinace now or wiat?
    Thanks.

  • Chris said:

    "Be patient and hoard capital. There will be a time to buy/invest at some point. But, we’re definitely not there yet. Patience, patience, patience.". I could not dissagree more with this statement. The time to buy/invest is now! Everywhere across the country it is a buyers market and investors are snatching up properties left and right. Buy low, sell high… ever heard of it?
    I know of many wealthy folks from my church that are buy houses that were not wise investments and cost too much, but now the houses are at a great price and they are buying on the coasts.
    When purchasing property is again the "hot thing" it is too late and you missed your chance. Similar to gold right now, it is at an all time high, yet people are buying it up like crazy. You are too late the gold market is now the "hot thing" and that market too will leave people with devestation to their portfolio's.
    Everything needs to be done in a balance of course.

  • 20smoney said:

    People are buying gold like crazy? I know… wait for it…. zero people personally buying gold. Oh yeah, the masses can't get enough of it!

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