As we’ve said before nothing in housing is fixed. It remains a disaster, but a different type of disaster than we saw in 2007-2009. Then we had insanely inflated house prices encouraged by unwise Fed policy and similarly unwise social engineering (The Community Reinvestment Act). But it was acute. Now we suffer with a chronic condition which dogs the economy. (Also encouraged by the Fed and unwise social engineering.) However, as with any serious chronic condition periodic flare ups can become acute conditions and we might be looking at such a flare up now.
How do we get out of this cycle? How do we finally “cure” the housing market? We let it really and truly correct. Prices must fall and reflect real wages. That’s it. Simple. But it will be painful.
It’s likely going to happen one way or another. We can go kicking and screaming – like we have – extending the pain of the correction. Or we can let the market work and do its thing so we can move on and get past this ongoing depression. (Or at least begin to.)
Attached is a very good and up to the second report on the housing market in the USA. Well worth a read if you are thinking about moving anytime in the next 5 years.
Given my in-depth analysis of why housing markets are showing worrisome signs of tanking now, caution your clients to assume the worst and consider a prudent course of action.
Here is my specific advice to you for your clients with real-estate investments:
- Disregard pundits who are confident of a continued housing recovery.
- Do not make the assumption that an underwater house will rebuild positive equity over the next few years.
- Clients thinking of moving should put their house on the market now at a price based on a professional appraisal.
- Clients with underwater investment properties should consider selling some or all of their investment real-estate holdings while markets are still liquid.