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Has Housing Reached A Turning Point Or A Point Of No Return?

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Real Estate Agent with Keller Williams Capital Partners Realty 277320

Thisis a great post by John and it is well worth your time to read it

Original content by John Mulkey

While the pundits and politicians discuss the housing crisis and the various ways to effect a recovery, the question to consider is: Has housing reached a turning point or a point of no return? It appears that housing is unlikely to return to its most recent glory days. But that’s not necessarily a negative interpretation; it just means that the housing market of the future will look dramatically different from that of the past decade.

 

graph trending upwards

We now know that the housing boom of 2004 – 2006 was temporary and artificial. It wasn’t an indication of forever escalating prices; though many seemed to believe so. The boom market was a bubble of inflated prices and irrational expectations of outlandish profits. Just as the stock market bubble that preceded the Great Depression created investors of doormen, maids, construction laborers, bartenders, and others seeking to capitalize on skyrocketing stock prices; the housing bubble created a wild frenzy of speculation and inflated home prices that was impossible to sustain.

 

Homeowners who purchased anticipating great profit, as well as investors, flippers, real estate agents, mortgage brokers, and those who bought early enough to borrow against their profits, have seen their dreams of easy cash and growing equities vanish. More than two million of those homes have fallen to foreclosure, and millions more are doomed to follow.

 

Hindsight is great, and shows the error of such paths. We should have known better, but we didn’t want to miss what appeared the opportunity of a lifetime. Homes, however, are not a commodity to be traded like soybeans, pork bellies, or precious metals. Homes are just that, a place to live, raise a family, create memories, and find solace at the end of day.

 

So, has housing reached a turning point or a point of no return? Perhaps it’s done both. Perhaps we’ve learned a valuable lesson—some of our most important ones come at a great price—and though the cost for many has been unbearable, the lessons remain. The bursting of the housing bubble may ultimately restore order to both housing and the financial markets; and the artificial market is doubtful to return until some future time when its memory has been erased.

                                                                                                                                                        roasting marshmallows

With that in mind, should anyone buy a home today? Of course, those who need one. However, some of those motivated solely by profit may find disappointment. Will home prices increase? Without question. But there is a question of time, and how  much will be required before prices increase. History tells us that the prices of those homes bought with careful consideration of both location and value will increase at a rate above the rate of inflation. If we do better, that’s great. If we don’t, we mustn’t lament, for we bought a home; and that can be worth far more than money in the end.

 

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