Monday, October 12, 2015

Home Values are about to Collapse

I have been a real estate bear for a long time.  After 2009 when real estate collapsed and so many foreclosures took place I said that it was unlikely for real estate to come back to the levels we see today for a very long time, maybe ever.   I was proven wrong by artificial low interest rates and low construction rates (we didn't see Tyvek for years in Northern IL).  

New household formations were put off.   The influx of Foreign capital to buy real estate (25% of our total sales nationally) supported low inventory levels.  Now that is stopping.  The fundamentals in the housing market are very poor.  We have now an echo bubble of the last bubble.  It's going to be really rough.  We may not have the foreclosures, but values are going to plummet as inventory builds up. This will all happen in the next 18 months.  What is needed is one simple thing. Economic growth and income increases.  That cannot be done by mandate or fiat, it must come because as a nation people are back at work making decent money. 

SO if you own a home, ask yourself what is going to happen if your house drops in value by 1/3rd in 24 months.  It happened in 2008-9 and is about to again.  It could be even greater for a short time.  A home is not an investment, it's simply a place to live.  A place to keep warm and dry.  A place to stay out of the wind and rain.  Any money you put into it is gone.  You can never get it out.  I was wrong before, but I'm not this time.  Prepare for impact.

Here's an analysis that will save your life and maybe your home.  It's also a way for you to consider your future. 

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