The purpose of this article is not to push an agenda, sell a product or to convince you of anything. Rather, I’d like to inform you of some of the facts and my opinion on the housing market. As much as part of this article is my opinion, I want to point out that I have no allegiance to any media outlet, association, nor do I work in the real estate or mortgage banking business anymore. Having done so in the past has hopefully allowed me a few insights to pass on. Many people will “speak up” a situation as it is directly tied to their financial well-being. That’s not necessarily a bad thing. It can be but there are degrees of separation. I try to be objective or at least point out when I have a self-interest in that which I write about.
The Bias In The Media
Anytime you hear someone in the media asking the president of the National Realtors Association their opinion on housing, you should know that (by nature) their response is biased. It is probably going to be rosy and leave a lot of pertinent information to be discovered. Imagine for a moment if I was a mutual fund manager who ran a U.S. based equity fund. How objective could I be commenting on the U.S. stock market? I’d also say:
No one else will ever be more concerned about your well-being than you. Take care of yourself. Look out for your interest. How? Look at every opinion, statement and judgment presented to you with the idea of first knowing if the person making it has a financial interest. Then and only then can you decide if it makes sense for you. Don’t think positions of authority mean an honest answer is forthcoming. Ok, so you want an example? I don’t blame ya. Ask and it shall be given:
Here is Ben Bernanke back in 2005-6 explaining why a housing correction is highly unlikely and that he doesn’t buy the premise of prices even budging lower.
The bad debt is currently being taken out of the system. That is what the economy is choking on. The process of unwinding debt will be painful and take time. It reminds me of the 30 day juice fast I’m currently on. Throughout the fast there are days whereby my body is expelling toxins that never should have been there (like some of those mortgages) in the first place. Don’t overlook what is going on, what has to be done and what will be done one way or the other. Just like there are laws in nature, there are laws in the “financial universe” that can not be avoided. To get hung up on what this politician is doing or who that one is “screwing” isn’t just boring; it’s taking 2 steps backwards and standing in the mess.We can usually fix our own problems, but only when we get honest about our contribution to it and just move forward, learning from our mistakes.
Here are some headlines and links regarding the Florida real estate market:
Seminole Judges Schedule 300 Foreclosure Cases in 3 Days
‘Baldwin Park’s downtown struggles, frustrating shoppers, merchants.’
-In the U.S. there are 131 million housing units in total.
-76 million are owner-occupied.
-37 million are rental units
-18 million are vacant
-9.8 million homes are in shadow inventory (these are homes that are in foreclosure or expected to end up in foreclosure within the next 90 days. For an explanation of how this number is derived, check out the following article from Naked Capitalism
I am highlighting the shadow inventory above because this is the number you won’t hear about in the media so much. We all need to understand that 9.8 million homes will take a LONG TIME to work through. We’ll see blips of increased activity along the way. But remember that no market goes straight down, or up. Imagine you go to sell your home and then, boom across the street a short sale occurs well below your asking price. That’s the market we’re in now and for years to come. Please don’t shoot the messenger.
This does not mean that owning a home is a bad thing. Owning your home should still be a long-term goal if that is what you want. But don’t believe the hype or feel the pressure that you need to rush out tomorrow and buy a home before this market rebounds. Those comments are usually coming from people that just haven’t taken the time to look at the data. Usually it is something like: “You won’t see these prices in your lifetime.” This is the buying opportunity of a lifetime for smart people.” I love that one…kind of like if you don’t buy you’re dumb…no thanks!
These comments sort of remind me of 2006 when I was spending my time telling people not to buy houses and putting my house on the market. The comment I heard most was, “You’re going to regret it.” That was only a confirmation to sell. People were absolutely worried that if they didn’t buy now (2006), they would never be able to afford a home. It was the end of a mania. This is when people stop thinking. They were just reacting. So, what can you do now?
A Few Simple Tips of What To Do Now
-If you don’t own a home, don’t be in a rush to go out and buy one tomorrow. Look for the best deal. You are in the drivers seat. Let the market come to you.
-Take your time knowing it will take prices a long time to stabilize.
-Find out where you want to live for the next 10 years. If you’re unsure, do some research. This has always provided me with a good list of places for mini-vacations or weekend getaways.
-If you’re an existing homeowner and struggling with your mortgage, call your lender and look for ways to adjust your mortgage.
-Remember the worst thing to be is “house poor.” Don’t ever bite off more than you can comfortably pay each month. What’s the point?
I’ll end this long post with something I said earlier:
No one will ever be more concerned about your well-being than you. Take care of yourself. Look out for your interest. How? Look at every opinion, statement and judgment presented to you with the idea of first knowing if the person making it has a financial interest. Then and only then can you decide if it makes sense for you.
