I think that all real estate professionals have been watching reports concerning the housing market. However, the amount of reports reflecting pessimism or optimism have been so many, that it is easy for us to ignore them now. To be honest, most positive reports are coming from Realtors who want a good spin on the issues, while negative reports seem to be originating from the financial community as well as individuals who are trying to sell their home.
Yesterday, I read this report about the investment firm ING looking towards the British market, while pulling away from the US market. Their fear was that worse is to come. The manager, a Mr. Robert Houston, felt that there was more potential for growth in the British housing market, but he did see that there were investment opportunities in the US debt market. At first, I found no meat in this article to support such a belief. This morning I found another report regarding this downward trend, which presented me with an argument that I could get behind. I wonder if this news is just coming on the tails of all of the bad news coming from the financial markets though.
Here is the argument in a nutshell: as lenders tighten up their rules for lending, there will be less buyers in the market. Values can continue to go down below a reasonable value as fewer buyers are harder to find, and as more people walk away from their homes when they realize that the values are lower than what they owe. Add on to that is the number of foreclosures as homeowners find themselves with ARMS that they cannot afford. Maybe this news came just at the right time for me to accept it, because I am reading up on the mathematical theory of Emergence. One concern that I have about foreclosures is that as more occur, it will become acceptable for others to follow that path. This spins out to effect neighborhoods which have to deal with the problems associated with vacant homes (crime and appearance). Eventually neighborhoods cannot maintain these homes, so the neighborhood starts falling into disrepair, which leads to home values to decrease. In one way, emergence theory could be applied to this spiral, showing that it is quite possible.
On the other hand, the National Association of Realtors has focused on the marketing campaign which shows that all real estate is local. Realtors are speaking of good times, keeping busy with work. The motto may seem trite, but there is a truth to it. Take my city, or state even. Houston has been experiencing job growth in the past year due to the higher fuel prices. This has brought an influx of residents, which in turn requires the city to have a place for them to live. Many are buying homes. The “but” to this statement is that buyers are few overall. Home values have either risen or remained steady, which is good news for sellers. There are various reasons behind the disappearance of buyer, like tighter lending practices, financial issues, or just waiting for a better price. Houston is not alone in this trend. The problem areas for housing really is California, Florida, Phoenix, and Las Vegas. Certainly their crisis of a downward spiraling value will effect the entire nation’s economy, but it might not be that great on individual locales. Houston never had home values spiral quickly upwards, so there has been no fall. Most of the nation is in the same situation as my city.
Maybe just the fact that reports are coming which worry over the housing market in general will cause an effect where others follow the example of these concerns. In the end, we will be looking at a not-so-great market for the next year.