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What's in store for the economy and housing market?

By
Real Estate Agent

Short sales will go away after house prices rise near former peak levels. That may take a long time to happen. It looks like the economy is finally starting to improve. But, when is the RE market going to follow? First off, the economy if going to improve fairly slowly.

The reason is that there is so much debt being unwound. The financial system is damaged. Unemployment is up just about everywhere. Unemployed people short sale their house. They sure aren't buying new ones! Unemployment won't decrease until well into a recovery. That's because businesses don't hire back on employees until they absolutely need to.

So the real estate market may pick up from an improving economy, but that won't be for another 6-12 months. Sure it's busy right now because of the tax credit. However, some people are arguing that buyers will go away after the tax credit expires, thereby causing a double dip in the RE market.

Once the economy picks up, then inflation will start to increase. The monetary supply has been increased so dramatically that inflation is sure to follow. As a comparison, look at China which currently has inflation problems. The monetary supply there is up by 35% since the beginning of the recession. When there are 35% more yuan chasing after the same quantity of goods, then the goods will increase in value. It reminds me of playing monopoly as a kid. When you first start, everyone is poor.

It's a big decision on whether or not to pay $500 for boardwalk. After the game has been going for a little while, Boardwalk shoots up in value. The 1 or 2 rich players are now willing to pay $2,000 to $3,000 for it. The same thing happens with the US money supply. It's not a question of if inflation is coming, but a question of when.

Inflation is both good and bad for the housing market. It forces interest rates up, therefore driving house prices down. So inflation in the beginning is bad. But, after it has been around for 2-3 years, people will start to look to RE as a hedge against inflation.

At that point housing prices will start to rise. But, that's a long cycle to look at in the future. That's why I'm betting on short sales for the next 2-5 years. But, don't just take my word for it. Do your own research.

If you're running into problems with short sale files, then you probably need to look into the How to Escalate a File Course. Get more info at http://www.HowToEscalateAFile.com .

You can get a copy of all the fax numbers for congress and a fax template to send them here: http://shortsaleagentadvocate.com.

Got questions about short sales? Just ask.

Ben & Chris Curry - The Short Sale Agent's Advocate

Comments (2)

Anonymous
Ann McCurdo

Yes. I have to compliment you. I have a degree in economics and I once worked in a bank before I became a real estate agent. This is the best simplifed prediction of the future of the US economy, and its real estate market, I've read yet. It's good because there's no false positive remarks about how things are gonna get better, or we're turning around, kind of nonsense. It's gonna take a long time 5-7 years before the RE market gets back to normal levels of activity. I recently tried to explain all this to a fellow agent, who then told me "Don't be so negative. Real estate always comes back, and it will soon. Just think more positively." I think she needs to think more realistically. I also enjoy and find helpful your comments on short sales. Good job, guys.

Apr 07, 2010 07:35 AM
#2
Don Sabinske
Don Sabinske, Sabinske & Associates Inc. - Zimmerman, MN
Sabinske & Associates Inc.

I agree.  This isn't going to improve for several years.  I concur with Ann, this will take a long time and there is no sense in not seeing the forest for the trees.  If you want to stay in real estate, be prepared for some very lean years.  I like it.  The Auntie Ems, and the people who like to decorate houses for a living will get out of trying to sell real estate.  Real estate is numbers and grinding work.  Those of us who are still standing understand that.  Thanks for another great post. 

Apr 07, 2010 03:36 PM