Housing Weakness? I do not have blinders on.

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Millionaire Now! by Larry Nusbaum

This blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth".

Housing Weakness? I do not have blinders on.

Posted on 08/24/2006 13:49 PM | Link | Post Comment

IN THIS POST I WILL NOT BE CONCERNED WITH THE DOOM & GLOOM STREAMING FROM THE MEDIA AS THEY SELL FEAR AND GREED. NOR, FROM THE REAL ESTATE COMMUNITY AS PERPETUAL CHEERLEADERS FOR R.E. HERE, I ASK QUESTIONS & THEN YOU CAN DECIDE....
http://www.millionairenowbook.blogspot.com/

FIRST: Download UBS analysis of housing market data.
Second, read: The Econoday report

Please understand that THERE IS ONLY ONE WAY TO INFLATION-PROOF YOUR RETIREMENT: Real Estate Ownership

BTW, MORTGAGE RATES ARE DROPPING AND WILL CONTINUE TO DROP.

Read Nouriel Roubini's The Biggest Slump in US Housing in the Last 40 Years…or 53 Years? and get the dire outlook for housing and the U.S. economy.

Existing home sales see large drop in July & in Phoenix

Barry Ritholtz weighs in: Is a Housing Crisis Approaching? & How We Got To This Point in the Housing Market

1. The media is bombarding us with articles about housing's weakness as reported in the "data". But, we don't refer to weakness in the stock market based on volume but rather price declines. So, why do they do that for the housing market? To date, for better or for worse, with high inventories and few transactions, we have not experienced price declines in most markets.

2. Why does the media talk about a "return to normal" as if there is any period in real estate that's really normal. Do they mean an equal buyers and sellers? Because, as fast as there were more buyers 6 months ago there are clearly more sellers today. In the course of the 7 year real estate cycle I know of nothing that is "normal".....

3. Right now, inventory levels are everything. What does that mean? It means that an experienced reader of the numbers knows from past 7-year cycles that we are in a transitional period of about 6 months or so for sellers and their agents to adjust to the changed market realities. Listings now fall into the following main categories: real sellers who, with the help of their agent, have priced their house properly and will meet with success; fake sellers who are simply "testing the market" with old & stale high listing prices and they will pull the house off the market when the listing expires; Real sellers whose agents "bought" their listing with a very high and unrealistic listing price, thus very badly hurting their chances to sell and they wind up lowering their price once or twice. (this also adds days on market skewing the entire marketplace). But, is that really falling prices if the property is simply reduced to what it should have been listed at in the first place?; Desperation listings for all of the same reasons regardless of periods of rising rates or periods of price appreciation and more tied to one's own personal financial condition.

Now read: 6 reasons that homes don't sell.

4. You have no doubt heard the question many times: "Is it cheaper to buy or to rent?" What a dumb question! I am quite sure that it must be cheaper in most instances, but, the opportunity costs, at any point in the past, in almost any market in the U.S., would have been devastating had you rented.

5. There has never been a Real Estate bubble. Doesn't mean it can't happen. But, what are the chances that if you bought a house for $500,000 today and the bubble "pops", that it's values goes down to $250,000 or even $150,000? And, can there be a financial bubble if it doesn't pop?

6. Suddenly, there is a change happening right in front of us that have left Home Builders unprepared (as well as their stockholders and analysts): Here in Phoenix, where we build more houses than anywhere in the country, there is a shift in buyer's interest away from new builds and towards older, more established neighborhoods. Why? They no longer want to live in construction zones, in new areas, where no (retail) services are available close to where they live. No wonder downtown urban vertical living is experiencing a new boom.

read: With America's housing market clearly cooling, will commercial real estate start to swoon?

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