I am not a real estate guru, but here is my argument: States that are judicial where the state has to foreclose and the judge is involved still are not sorted out. Namely, not all residents have been evicted and many of those don't pay a dime in mortgages, and their houses have not been counted as inventory. So I expect another wave of foreclosure. Real estate is tied up to income and development in the long run, just like any commodity on the way down there are upsides and that should not be considered a recovery. The all country is unemployed, and until we get to a normal level of 5-6% real estate can not maintain an up side. Immigration: We have no immigration coming to the united states that can afford houses. Those who come in, sadly, are cheap labor. Despite the low interest environment, banks still don't lend money out. 20% deposit mandatory, and many do not have it. Rentals will be going up, and if you can keep a tenant while being responsible for maintenance, seeking high rent and facing the risk of a tenant not paying, while you can not evict him, etc Next catastrophic wave to hit is the student loans that will not be paid. If you think that Banks did not do justice to real estate holders, wait until you will heat what they did to student and how they shoved credit cards down their throats with 20% interest plus fines to the most naive. They still live with their parents and cant afford a dime, so those who typically should have bought a house after a few years of graduation will be paying student loans for 20 years. Good luck speculating. RG
Good post. I think your last statement holds the most weight. We are at the tail end of the boomer generation's consumption and the "coming of age" generations are saddled with enormous student loan debt AND reduced prospects for gainful employment. It doesn't help matters that we are in the midst of a liquidity trap with high inflation in essentials and a deflationary backdrop for real estate. I also believe that the housing statistics have largely overlooked alot of the "external" demand from foreigners who have had a strong currency vis-a-vis the dollar and how that has driven the markets in the warm weather states. (It softens the domestic weakness and masks how bad the situation really is). Anyway, we've had 3 years of ZIRP and record low mortgage rates and yet many locales continue to drop in price. It speaks largely to how badly the boomers want out and the upcoming generations cannot afford in.
You hit the nail on the head. The property taxes. IMO, that's the biggest obstacle...some locales play fair and reduce them along with the assessed values of the properties. Others (strong union states), play with the "multiplier" and make certain that your tax bill keeps rising, no matter how weak the resale market might be. Assessments are another problem (condo issue, probably unrelated to what some people are doing with a portfolio of properties).
Thanks! Yes, you have South American who jumped on South Beach real estate and bought out the most expansive condos at 50-70% discount. But, they won't live here and will not contribute to the local economy and a real estate pocket like this will not change the real estate country wide(no pan intended) I think that that Danny Deutsch said it once best is his interview on CNN, USA will be "relevant" like the UK is relevant to Europe but not a super power anymore economically. RG
We are in strange place with RE. When inflation hits the Fed won't be able to hold rates down, rising rates will kill the RE market but then RE is good to have in inflationary times! Cash will be king but what hard asset actually fares best in inflationary times? I read that stocks do ok at the outset of hyperinflationary times but end up dismally behind inflation as the actual economy gets destroyed by the inflation... Probably there are some ETF's but RE should be easy to rent in times when working people cannot buy it but have to have a place to live...
2010 foreclosures have not hit the market yet. they will come soon. the 2010 foreclosures were the ppl who held on with 401ks, savings, tried second jobs who just could not hold on.
it takes only 4-5 months to foreclose in Arizona, in other states it may take two years or longer, that is why the market bottomed in phoenix, supply is down 43 percent year over year and prices are up 13-30% from the bottom in the hardest hit suburbs, i sure hope you are right that 'another wave' of 2010-bought homes are going into foreclosure so i can pay cash for more homes, with 5-6 all cash offers per house doesn't seem likely.
Falling home prices drag new buyers under water "More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame." http://www.reuters.com/article/2012/04/26/us-usa-housing-negative-idUSBRE83P12E20120426 Real Estate very location dependent of course, but 1million are feeling some heat.
"Home prices in Phoenix area up 20 percent in past 12 months" http://www.azcentral.com/business/r...6phoenix-area-homes-prices-up-20-percent.html I still can't believe how fast things are turning around here. 2,000 Sq Ft homes built 2005-2007 were $70,000 everywhere, now $120,000 in less than 1 year. I only bought 2 homes, friend bought about 10, now he's making money on commission and finding tenants for everyone.