Has Housing Reached A Turning Point Or A Point Of No Return?

Our friend and colleague in Georgia wrote a great article on the housing market. I'm posting it here so you have a another chance to read it. He's spot on in his assessment.

While the pundits and politicians discuss the housing crisis and the various ways to effect a recovery, the question to consider is: Has housing reached a turning point or a point of no return? It appears that housing is unlikely to return to its most recent glory days. But that’s not necessarily a negative interpretation; it just means that the housing market of the future will look dramatically different from that of the past decade.

 

graph trending upwards

We now know that the housing boom of 2004 – 2006 was temporary and artificial. It wasn’t an indication of forever escalating prices; though many seemed to believe so. The boom market was a bubble of inflated prices and irrational expectations of outlandish profits. Just as the stock market bubble that preceded the Great Depression created investors of doormen, maids, construction laborers, bartenders, and others seeking to capitalize on skyrocketing stock prices; the housing bubble created a wild frenzy of speculation and inflated home prices that was impossible to sustain.

 

Homeowners who purchased anticipating great profit, as well as investors, flippers, real estate agents, mortgage brokers, and those who bought early enough to borrow against their profits, have seen their dreams of easy cash and growing equities vanish. More than two million of those homes have fallen to foreclosure, and millions more are doomed to follow.

 

Hindsight is great, and shows the error of such paths. We should have known better, but we didn’t want to miss what appeared the opportunity of a lifetime. Homes, however, are not a commodity to be traded like soybeans, pork bellies, or precious metals. Homes are just that, a place to live, raise a family, create memories, and find solace at the end of day.

 

So, has housing reached a turning point or a point of no return? Perhaps it’s done both. Perhaps we’ve learned a valuable lesson—some of our most important ones come at a great price—and though the cost for many has been unbearable, the lessons remain. The bursting of the housing bubble may ultimately restore order to both housing and the financial markets; and the artificial market is doubtful to return until some future time when its memory has been erased.

                                                                                                                                                        roasting marshmallows

With that in mind, should anyone buy a home today? Of course, those who need one. However, some of those motivated solely by profit may find disappointment. Will home prices increase? Without question. But there is a question of time, and how  much will be required before prices increase. History tells us that the prices of those homes bought with careful consideration of both location and value will increase at a rate above the rate of inflation. If we do better, that’s great. If we don’t, we mustn’t lament, for we bought a home; and that can be worth far more than money in the end.

 

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Lottie Kendall, Realtor®

Compass

CA DRE#10215160; 650-465-4547

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Comment balloon 5 commentsLottie Kendall • January 12 2010 08:56AM

Comments

Housing is not going anywhere.  I first home to own is not an investment it is a place to live and should be a place you like and want to live.  Purchased long term and pay it off you will be fine.

Posted by Elite Home Sales Team, A Tenacious and Skilled Real Estate Team (Elite Home Sales Team OC) over 10 years ago

Great post Lottie. I think some home buyers need to re-evaluate their reason(s) for purchasing a home and to be more realistic on what they can afford. Many people seem to take for granted simple luxuries such as being able to afford to have a sturdy roof over their heads and focus too much on whether a house has every bell and whistle imaginable.

Posted by Gina Tufano, Ask Gina & Company, Northern Virginia Real Estate (Ask Gina & Company with Pearson Smith Realty) over 10 years ago

Elite Home Sales (Mark and Tim) I agree completely with your statement, "Purchased long term and pay it off you will be fine." That's what our clients need to know and understand.

Gina, glad you liked the post; John did a great job of stating things clearly. Hopefully some of the past "keep up with the Jonses" mentality will have left real estate and the focus going forward will be to have a roof over one's head and the stability in life that home ownership can bring.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago

Lottie-Let's hope it's both. We've reached a turning point (although this is probably overly optimistic) and a point of no return (somewhere we never want to come back).  Some markets are seeing turn around. The Charleston, SC market is one of those ranked in the top 5 markets to fare well in 2010 per SmartMoney.com and Moody's Economy.  I still think all of the news should be tempered with a lot of back up information and local economics.  We have been positioned well with a very diversity economic base which has helped us not to decline as much as many other markets.

Posted by Michele Reneau, Realtor, GRI ~ Charleston, SC Relocation Experts Team (Certified Staging Professional (CSP) Elite Instructor) over 10 years ago

Hi Michele--Agreed; real estate certainly IS local. A diverse economic base helps tremendously. Thanks for stopping by.

Posted by Lottie Kendall, Helping make your real estate dreams a reality (Compass) over 10 years ago

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