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A Different Opinion On The Real Estate Market

Opinion On The Real Estate MarketWhen I opened my email this morning, I found two similar but opposite messages from my readers, each containing a specific opinion on the real estate market.

While each sent me a link to an article with an opinion on the real estate market, they were very different.

Ultimately, there still is not a consensus opinion on the real estate market among "experts," so I thought I would contrast each article and show why this Bull believes we have many Bear years ahead.

Yeah, that's right, I'm a Bull. I believe in housing.

Why?

Actually, it is simple.

We are "making" more people every day and ultimately our future will require more housing. Until we see signs that our population is going to shrink, my long-term take on real estate is going to be bullish.

The costs of making homes is rising, and land (over the long-run) is a diminishing commodity. These are the perfect ingredients for long-term appreciation.

A Bullish Opinion On The Real Estate Market

The first article was sent to me by a reader who I suspect is hoping for a better market (aren't we all). The article was released by a very popular real estate news reporting agency, and not surprisingly was very optimistic about recent activity in the housing market.

RisMedia published Consumer Attitudes Stabilize, Positivity Spreads yesterday. Unfortunately, many real estate publications retain readership by offering hope without substantiation, and this is an example of such reporting.

I believe their opinion on the real estate market seems to be more consistent with cheer leading than with actual analysis of the activity and trends that we are seeing. A quick reference to a housing survey conducted by a broken Fannie Mae does not counter the reality of the numbers that are being reported in many US housing markets.

Yes Virginia, there is a Santa Claus, but he won't be here until Christmas!

A Bearish Opinion On The Real Estate Market

On the other end of the spectrum, an Op Ed at Fox titled Are politicians trying to destroy the housing market? This opinion on the real estate market claims that "statistics prove" that our recent housing collapse is "now worse than the Great Depression." It goes on to point out that things will not get better any time soon, and current efforts by our politicians (namely President Obama) are doing more to hurt the housing market than to help it.

While I do not have the statistics to either confirm nor refute his assertion, I would argue that while property values might have fallen more now than during the Great Depression, I suspect our quality of life has not been impacted nearly as much as what was experienced back then. But his article does have great merit.

In a nutshell, his opinion on the real estate market includes the warning that "as goes housing, so goes the U.S. economy." As housing prices have fallen, it has wiped out the bulk of the wealth in our country, and that has led to reduced consumer spending. Reduced consumer spending in turn led to millions of lost jobs, etc. The death spiral centers around housing.

Finally, the Op Ed closes with a call to educate politicians and hopefully change the Obama Administration's mind on ending the mortgage interest deduction on housing. While agree with him on point, I don't want to stray from the purpose of this article by changing directions here.

My Opinion On The Real Estate Market

Two opinions, two very different views. From "things are getting better" to "things are getting worse."

I believe that "hype marketing" is more disruptive than good. Sure, people need positive leadership to get them to change, but all too often, real estate articles are filled with outright lies to make everybody believe all is OK.

All is not OK.

Before my psuedo-rant, remember, I am actually a Bull for the future of housing.

My opinion on the real estate market is that it is very broken.

My Opinion On The Economy

My opinion on the economy is far less qualified than is my opinion on the real estate market, so take it with a grain of salt.

I suspect that the economy that flourished ten years ago was heavily influenced by the spending power of people who had artificial wealth.

A housing market that created Billions (Trillions?) of dollars in equity was bolstered by a mortgage markets newest "hot product line" ... the Home Equity Line Of Credit (HELOC). Suddenly, millions of people had millions of dollars to spend, and all they had to do was borrow against their homes.

People who put "no money down" on their homes were soon given tens or hundreds of thousands of dollars to spend, and this was a huge boon to the economy.

This borrowed money went immediately to consumer goods and services, which caused our economy to swell. Companies hired more people, paid more salaries, and contributed to taxing coffers both locally and nationally. All was good.

Here is the dire warning that I don't think many economists have received ... The economy that we all knew and loved ten years ago was built on HELOCs, and it will (NEVER) return.

Our economy probably has already rebounded to where it would have been prior to the housing market spike. There is no new HELOC economy waiting around the next turn.

If people want to get our economy back to where it was five to ten years ago, then they need to look beyond housing for that to occur.

Which Leads To My Opinion On The Real Estate Market

The real estate market needs time to recover. We have more homes than we need, but population growth and new family starts will help us consume this (if we let it).

If we want to speed-up the rate of recovery, we have to look at the real problem in the housing market (for those of you taking notes, this is the important part).

Historically, 1/2 of all home buyers have a home to sell first. As property values have fallen, this has demotivated some to move, and it has left many in a negative equity situation.

Think about it ... 1/2 of our buyer pool is trapped.

  • Our market is not slow because of tightened lending.
  • Our market is not slow because of foreclosures.
  • Interest rates have motivated everybody, but empowered few.
  • Our market is slow because you can't sell your home right now, 1/2 of the buyers are sitting this one out!

If you look at the current rate of sales, you will realize that the problem lies with negative equity home owners. Give them an out, without destroying their ability to re-enter the market, and you will solve the housing market crisis.

It's going to happen either way ... so we need to decide. Let time cure the housing market, or take aggressive action with short sales.

If we choose the "time" approach, don't be surprised to find the recovery is more than five years away.

My opinion on the real estate market is based heavily on supply and demand, so I'll leave you with a simple question:

What is your opinion on the real estate market, and what do you base it on?

re. opinion on the real estate market

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