Dallas News: When will the Housing Market Come Back? It Won't.

[El Pinko]

http://www.dallasnews.com/sharedcontent/dws/bus/columnists/sbrown/stories/DN-recol_10bus.ART.State.Edition1.4b10dd1.html


Fast and loose housing market is history

12:00 AM CDT on Friday, October 10, 2008

The trillion-dollar question everyone keeps asking about the economy is: When will the housing market come back? The answer should be apparent: It won't.

....

The U.S. housing market that arrived in the early 2000s and caused the collapse is history. It won't be making a quick return. Along with the current financial turmoil, there's going to be a fundamental shift about how people look at residential real estate. Assumptions that home prices will always keep rising and that housing is the best investment on the planet will no longer be sacrosanct.

....

Between 25 percent and 30 percent of recent peak housing demand is gone for good and won't be coming back. Those were the purchases made by investors financed with the cash leveraged out of other properties and the sales to buyers who never should have qualified for homeownership.

The buyers left in the housing market will have to make true down payments and show real repayment ability before they can borrow. That means fewer home sales, fewer home starts and less appreciation. And, believe it or not, that's a good thing. It makes a house a roof over your head instead of a get-rich-quick scheme.






There is only one point where I disagree with the author - "buyers who never should have qualified for homeownership." These people should have qualified - for reasonably priced houses. The problem was that in many bubble areas, a run-down starter home was $400=500K. Houses in this price range require 6-figure incomes, minimum. The problem is that speculation by flippers and investors drove prices far too high. And it's not "homeownership" until the house is paid off. It's homedebtorship.

[soothsayer]

1. speculators and flippers also should not have qualified. remember all those late nite infomercials

and seminars on how to buy houses with no money down, and how to actually walk away with cash in your pocket? those folks ALSO should not have been able to buy those properties.

[bmbmd]

2. I blame HGTV.

Buy a house, paint the walls-flip it for a fortune.

[KatyaR]

3. My aunt and uncle raised two children back in the 60s for less than

$30,000/yr income, her salary and his disability. They were able to buy a house and a car and feed and clothe their family--yes, it was hard at times, but they never went through the possibility of losing their home. So why can't people be able to have the same today? Forget the McMansions and and 1,000 sq ft per person homes, AFFORDABLE housing is the answer to so many of our problems.

[KharmaTrain]

4. Many Made Millions On The Side

For years I would see new housing developments go up where corn fields used to be. I'd joke as to where these people were coming from. In most cases, these developments were miles from any major business or manufacturing area and how quickly these things were going up...ya had to wonder if all these units were sold and how much of this "boom" was a lot of money made by contractors and banks who made big money off the builders and then again when the property was sold. The remote areas worked as I saw what I called the "starter home belt" move further and further out. In the 80's, the average "starter" was $50-75k...by the 90's it was $100-125k and then hit 200-250k in recent years. Local municipalities loved this deal as those soaring property values added lots of new revenues in their coffers.

The game was to build the homes and then find people to live in them...and this is where the sub-prime games really came into play...as banks needed a turn-over in these new developments that would enable the contractors and others to recoup their money and fuel even more speculation. This boom was due to bust and now we're stuck with an over supply of houses that are overpriced and a growing class of people who either can't afford to buy or even hold onto what they have. It'll take years for this mess to sort itself out...and with it depressed property values for years to come. Just like how the market has gone back to where it was 10 years ago, I suspect real estate prices will return to that level as well...and with it, taking down a lot of equity and forcing even more owners into financial hardships.

Ironically, the days of the house flippers aren't over...just look in your local paper and surely you'll see and ad for "bargains on foreclosures"...hoping people will buy properties at distressed values...pennies on the dollar and dump this problem on some of these suckers. Eventually the market will bottom, but I don't see it happening yet...especially on the real estate front.