Fortune Magazine article on the housing market's return
Mark Carlier of Marketlink Realty just posted this interesting article about our future's housing market. It really confirms what I have been thinking for some time now. That the rental market will be booming because of these short sales and foreclosures. A decrease in new construction will also bring up home values which is a good thing! Thank you Mark!
Shawn Tully has authored an article in the current issue of Fortune suggesting that we may be on the brink of a turnaround in the housing market. He cites a number of credible sources that point toward home price increases in the next few years. In a number of cities, the monthly outlay for renting is noticeably more than owning. Tully cites the dramatic decline in prices and the low levels of new construction as reasons that housing is on its way back.
He does acknowledge that the economy needs to improve and unemployment needs to drop to sustain a return of the housing market. The article suggests that renting is a popular choice among Americans that may soon change. He feels that the affordability factor will bring renters back to becoming home owners.
One item missing in this article is discussion, or even acknowledgment that renting is the only choice for many Americans. There is a large group of renters who have lost their homes through foreclosure because of extended unemployment or medical catastrophes. There are others who who have become accidental landlords when they outgrew their starter homes and had no choice but to rent the underwater place out and become renters themselves in a larger home. These folks can't just change their minds. If the system does not allow them back in, they will remain renters for many years to come.
Yes, the bookends, as Doctor Yun calls them, the first time buyers and the investors, will continue to buy. The move up buyers may or may not ever return to the market, no matter how well the economy rebounds. They can only be helped by home value increases or a decade or more of amortization. Without move-up buyers, I feel that the industry cannot prosper.
Recovery of the housing industry would be best helped by a program allowing credit-worthy move up buyers to port their debt to a new loan on a new, larger home. The alternative is patience, while a half generation of home owners remain immobilized in their starter homes is replaced by another generation.
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