Comments on: The Housing Market: The Disappointment Of The Decade

By: The U.S. Housing Market

The U.S. Housing Market — Thu, 06 Aug 2009 17:25:40 +0000

[...] I’ve said, a simple supply and demand equation underpins the housing market. Right now, there’s way too much supply. Thus, prices can only go lower. And in my opinion, [...]

By: DC

DC — Mon, 08 Jun 2009 02:50:43 +0000

Alex,
It appears to me that both of you are right in a sense. If one is interested in a property for a long term rental income, then this is a decently good entry point if you can find reasonable tenants w/ good employment or prospects. If, on the other hand, one is looking for capital gains on a property, then you are probably right that the market hasn’t bottomed and probably won’t for many years similar to Japan for the last twenty years.

By: Paul

Paul — Tue, 02 Jun 2009 00:51:36 +0000

It will be years before home prices go up. Yes there is a lot of inventory out there and it will take time to draw this inventory down, but we are headed for a period of high inflation, I recall when I bought my home in the mid 80’s, interest rates were pushing 15%, the higher the interest rate goes, the more pressure there will be on home prices, so until we get though this excessive inventory and after we peak on interest rates, then we will start to see home prices appreciating again. So unless you have to sell your home, hunker down and ride this one out, I estimate its going to take 3 – 5 years, especially in the former hot markets of CA, NV, AZ, and FL, where it might be more like 5 – 7 years. In the mean time if you want to invest in rental homes, now is the time to load up, plenty of deals out there and you should be able to make it cash flow. If you can’t make it cash flow, then it’s a bad deal and go look for another one.

By: jd

jd — Sun, 31 May 2009 19:49:22 +0000

Thank you for your clear cut explanation of how so many people wanted to believe that their home was primarily an investment that couldn’t fail to bring endlessly escalating returns. As a real estate and interior design professional I have witnessed many bright, successful people make giddy decisions about the value of what they own. So many thought they couldn’t lose by using “OPM” and neglected to think through a worse case scenario. Everyone wanted to be another Rockefeller.

If your first purpose in owning your home is not for your own security, shelter from the elements in a community in which you can thrive and at a payment you can really afford, it is inevitable that the day will come that all those “other people” will need to be paid. There is no joy in watching the foreclosure numbers as the financial, personal and social costs of this hard lesson will play out with pain for many. Lives have been “flipped” in the process.

Now the giddy process has moved to the foreclosure seminar attendees on their way
to making a killing in real estate. We’ll see.
Everybody needs a place to live.

By: Harry

Harry — Thu, 28 May 2009 18:06:48 +0000

Another factor supporting your argument is the lagging nature of home prices. When the recessions of the early 1980s and early 1990s ended, residential real estate continued declining for another two or three years. There is little to suggest that scenario won’t be repeated when the current recession is over.

By: Bob Lerum

Bob Lerum — Thu, 28 May 2009 17:08:20 +0000

Alex,
You have it right! I suggest if people want to convince themselves, just go to http://www.realtytrac.com. Put in your zip code, click “view map” and see how many homes are currently going through foreclosure just in your area. Now go city to city. This should be very convincing that low priced inventory will be here for a long time. Everyone’s realestate values will continue to drop for years. Also, peoples credit will be tarnished, jobs are being lost and the self employeed can’t get stated income loans, all reasons that will reduce the future potential “buyers pool”. In addition, our large baby boomer population as they age will begin unloading their multiple realestate properities over the coming years in order to simplify their lives. The population curve behind them is not large enough or wealthy enough to absorb all this inventory. It’s a simple- to much supply and not enough qualified demand senario.

By: Uppunda V Bhat

Uppunda V Bhat — Thu, 28 May 2009 16:51:33 +0000

I fully agree with your analysis. I believe that Dr. Skousen wrote that US economy is not dependent on consumer spending now.
I am glad I am learning from Investment U – from Porter Stansberry, Steve Sjuggerud and from your writings…..
I have been subscribing to several newsletters over a decade or more….

By: Paul Hasforth

Paul Hasforth — Thu, 28 May 2009 15:30:40 +0000

Alexander, you are totally correct. I live in Las Vegas (ground zero, and my daughter is in real estate. She says that almost all her sales are short-sale and foreclosures. The only other properties that are selling, are being greatly discounted. Additionally, she says that more foreclosures are about to enter the market due to the ending of the moratorium on foreclosures. Also comercial real estate is also suffering. I don’t see real estate bottoming until unemployment improves.

By: C.M. Oussoren

C.M. Oussoren — Thu, 28 May 2009 13:50:47 +0000

As a realtor for the past 30 years I feel the comments you made about the inventory and the absurd price escalations you’re correct.
An other point is that a number of potential sellers are not putting their house on the market because the market is so slow and feel it will not sell anyway. All are waiting for the upturn in the market.
The problem I personally see is that developers paid highly inflated prices for the land they purchased and escalated the prices of homes accordingly and even at whatever prices the buyers were willing to pay with easy obtainable mortgages. That in turn escalated the prices on resales beyond what was a normal level of appreciation.

By: Sam

Sam — Thu, 28 May 2009 11:29:36 +0000

Your reasoning, as far as it went is sound. It does not however deal with the fiat nature of the USD. Housing prices are denominated in USD. Short term interest rates are controlled by the US government. Therefore the USD dollar pricing of real estate becomes another X factor.