Ignoring The Facts Won't Restore The Housing Market

By
Services for Real Estate Pros with TheHousingGuru.com

In a post I did a couple of days ago, Six Reasons Why The Housing Market Peaks Will Not Return, I outlined calendar reasons why I don't anticipate a return the glory days of the past decade; and while most seemed to understand my purpose for writing the post, some suggested that I should refrain from such "gloom and doom" projections.

 

Some even suggested that I had some sort of agenda, that I would somehow benefit by creating negative expectations. Strangely, I’ve been criticized when I pointed out opportunities in the housing market and as well as those times I advised caution; but I have no vested interest in either promoting or impeding home sales. The purpose of my blog is to share the knowledge I’ve gained during 4 decades in the housing industry.

 

I write to help both buyers and sellers make the most prudent choices, and I base my posts upon what I have observed in the market as well as the overall economy. Is it just the opinion of one man? Of course it is; my opinion is the only one I can have. And, I don’t claim to have all the answers, but I can offer the experience of having come through several recessions. I make no attempt to change the opinion of anyone, for I have no benefit in doing so; but I do attempt to encourage an intelligent discourse so that we may all benefit.

 

Some of those commenting have reminded me of the cyclical nature of the housing market--that we only have to wait for things to return to business as usual. There have even predictions of a greater boom to follow. But this is not the recessions of 1980 – 82, or 1990 – 91. This is not the dot com bust. Conditions are vastly different.

 

Yet, regardless of what has transpired, many expect the government’s housing and stimulus programs to restore things to normal. However, their efforts to date have been dismal failures. The projections for HAMP, the program intended to save millions from foreclosure, appear to have been grossly overestimated. And the government’s stimulus and TARP have only served to keep failed institutions in business, while creating few jobs.

 

Today we have predictions of a bottoming of the housing market, talk of "green shoots," and the end of the recession; but we have also had voices in our past, financial “experts” who have also made predictions, and much of what they described was based more in wishful thinking than in fact. Some of their predictions caused others to take action or make purchases and investments based upon the information presented; and many suffered greatly.

 

Some of the more blatant examples are listed here:

● “We will not have any more crashes in our time.” John Maynard Keynes, 1927

● “There may be a recession in stock prices, but not anything in the nature of a crash.” Irving Fisher, economist, Sept. 5, 1929

● “The depression is over.” Herbert Hoover, June 1930

● “This is the time to buy stocks.” R. W. McNeel, financial analyst, October, 1929

And more recently:

● (We will have) “an on-budget surplus of almost $500 billion . . . in fiscal year 2010” and “an implicit on-budget surplus . . . well past 2030.” Alan Greenspan, 2001

● . . . “we see no serious broad spillover to banks and thrift institutions from the problems in the subprime market.” Ben Bernanke, May, 2007.

 

I have more than a hundred pages of similar predictions, all flawed. What that demonstrates, of course, is that mine could be flawed as well. But if I’m even partially correct, is it not better to prepare for the consequences, to base our decisions upon the potential that the market will not recover as it has in the past? Everyone must ultimately make their own decisions, and must steer their course based upon their interpretation of the information presented. If my post helps some to make more prudent choices, then my efforts have been worthwhile.

 

road sign

Finally, I’m neither predicting the total collapse of housing nor advising buyers to become renters. For those who need and can afford a home, great bargains exist in almost all markets. Home ownership can provide advantages that far exceed any financial return; and for those who make wise purchases, the future may still provide a healthy return.

 

My original post was intended to serve as a guide for those unfamiliar with the intricacies of today’s market, for those expecting the market to follow past trends. As I have outlined, I don’t believe it will; and I would advise anyone considering the purchase of a home to seek the guidance of a real estate professional to help them through the mine field of short sales, FSBOs, and foreclosures. The consequences of making the wrong purchase can be dreadful, but the rewards of a well-researched purchase can be significant.

 

 

For more on the advantages I see in home ownership, I would suggest reading the following posts:

Home Values Have Remained Unchanged

The Best of Times or the Worst of Times to Buy a Home?

Why Should I Use a Realtor?

 

The Housing Guru: The one source for all your housing questions

 

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Rainer
191,456
Jon Budish
Resident Realty - Fort Collins, CO

I have been to seminars conducted by people that are at the top of the real estate world. In both instances (separate gatherings) they said tough times were ahead for at least two more years, and we should plan our business accordingly. That's why I earned my CDPE designation. If people want to be optimistic (ignoring reality) that's fine, but I think it would be prudent to at least prepare for lean times.

Feb 27, 2010 07:07 AM #1
Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Facts are facts.

Opinions are opinions.

The facts that I see today show a continuation of the dep, er a recession for another 10 years.

All I can say to folks who do not believe is "stay out of the mall and save  your money".  If you're in real estate sales, you're going to need it.

 

Feb 27, 2010 07:25 AM #2
Rainmaker
455,517
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Jon - I agree. Even in good times, it's best to have some money "tucked away."  Today, I'd want even more.

Lenn - Like many of my critics, I'd like to disagree, but the facts I see tell me I'd better follow your advice. "stay out of the mall and save your money"

Feb 27, 2010 11:32 AM #3
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1,322,410
Charles Buell
Charles Buell Inspections Inc. - Seattle, WA
Seattle Home Inspector

John, I liken what is going on to "bad plumbing."  There is no less "actual" money around---it just isn't flowing through the system the way it is supposed to and there are way too many leaking toilets letting it all go down the drain----and being collected by the cess-pool of greed.  Because most of what we call money has no intrinsic value other than what we "give" it, confidence will always be the biggest component to maintain in any "recovery."  We should all hope that it does not go back to business as usual because it was a lie then and would be in the future as well.

Feb 28, 2010 04:46 AM #4
Rainer
242,318
San Antonio Texas New Homes for Sale
www.sanantoniotexasnewhomesforsale.com - San Antonio, TX

How long did it take our economy to get into this situation?

 

It usually takes longer to get out of a situation  !!!

Feb 28, 2010 05:52 AM #5
Rainmaker
455,517
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Charles - I certainly hope we don't return to the "Bubble Economics" that brought us here; but the politicians do seem enamored with the system.

Robert - And this time should be no exception.

Feb 28, 2010 06:15 AM #6
Rainer
288,231
Leslie Helm
Tennessee Recreational Properties - Jamestown, TN
Real Estate For Trail Riders

Hi, John. If I didn't value your opinion, I wouldn't read your post. It may sound like a bucket of cold water because...it is a bucket of cold water! I don't think it's cyclical, just because it has always been cyclical but, if it is, I agree with Lenn...I think it's going to be at least 10 years before we pull ourselves out of this cycle.

Charles's analogy is perfect. It's "business as usual" that got us into this mess.

Feb 28, 2010 06:31 AM #7
Rainmaker
455,517
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Leslie - And as always, I value your input.  Thanks for commenting.

Feb 28, 2010 06:46 AM #8
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890,574
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Everybody likes the bubble while it is inflating, and many seem to think the solution for the bursting bubble is to inflate a new one. 

Feb 28, 2010 08:48 AM #9
Rainmaker
455,517
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Lane - Unfortunately, we've developed an economy that seems to thrive on creating bubbles. The tech bubble burst a decade ago; now housing's time has come and gone.  Another will come soon. 

Feb 28, 2010 08:57 AM #10
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Rainmaker
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John Mulkey

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