In a post I did a couple of days ago, Six Reasons Why The Housing Market Peaks Will Not Return, I outlined 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.
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:
The Housing Guru: The one source for all your housing questions