Just as the velocity of money moving through the system determines the health of an economy, the number of transactions in real estate affects the health of the industry. Facilitate an owner-occupied home sold in order to buy another owner-occupied home, and there is a beginning of a chain that will eventually gain momentum. Unfortunately, there has been no effort in that direction by Washington or from the lending industry.
Times change, people change. Our wants and needs of today or five years ago are constantly evolving, and our concept of the perfect home is constantly evolving too. Whether the family size changes or our lifestyle changes, the desire for mobility in residency has been a pillar of our society for generations. Sometimes our needs have been met by changing the home we live in to suit our new standards. Sometimes we have simply changed from one home to another.
The current state of the housing market has altered our collective lifestyle, and it looks like the change could be permanent. Traditionally, when people fell on hard times that they could not overcome, they sold their homes, sometimes even taking away enough cash to help them get back on their feet. Today, because of the drop in home values, there is no sale, or maybe there's a short sale. Most likely there's a foreclosure and sale that further lowers neighborhood home values.
Every time home values drop, more homeowners are locked into remaining where they are, and that adds to the slowness of the market. The downward spiral continues. More and more homeowners are losing the ability to make a lifestyle choice every day. We can listen to the "good news" from the NAR, and we can believe that the industry is improving, but I don't think it's happening.
As Ara Hovanian, president and CEO of Hovanian Enterprises said yesterday on CNBC, we have a couple bookends holding home sales together. We have some first time buyers who still have jobs, and we have older baby boomers who have lots of money buying homes. He referred to these two groups as the "bookends" and they are sustaining what there is of the industry. So, the two ends are doing OK, but the middle, Middle America, the middle class in many instances, is doing nothing.
The housing market is not going to fix itself without some substantial changes. We can accept the dismal status quo as the "new normal," or we can take some dramatic action. The action has to come from either Washington or the lending industry, or both. That's a sorry direction to look for progress, isn't it?
Comments(2)