Nothing in housing is fixed. The market is still broken. It might even be worse than before 2008. Government activism (via Fanny and Freddy and most importantly the Federal Reserve) screwed up the market initially and caused the Crash. Yet some in the fever panic thought activist government was the answer to the housing crater caused by government activism.
In order for housing to get back to something close to healthy prices needed (need) to crash more. This would have let young buyers in at sustainable levels (even if credit was tight initially) which would have then pushed blood through the real estate sector. Not zombie blood like we have now. But real honest to goodness economic vitality.
But we didn’t do that and now we have a whole generation of young people who can’t buy a house because house prices (to a large extent) have been buoyed (in the short term) by government planners. This is a problem as people who can’t buy starter homes don’t typically buy larger homes. The ramifications for the economy from there are obvious. Who’s going to buy all those Baby Boomer mcmansions?
Someone will. But very possibly at lower prices than today. Once that starts happening we’ll know that real estate really is on the mend. And I say this as a home owner with equity to protect.
The headline for much of this year has been that home price gains are easing. Prices are still higher compared to last year, but not nearly as much as they had been. Now, suddenly, it looks as if home values could actually go negative on a national level.
“That will be the first time collectively, as a nation, we’ve seen prices drop since the low point or the trough of the housing crisis,” said Alex Villacorta, vice president of research and analytics at data firm Clear Capital.