If you believe the media’s packaging of economic news you’d expect America to be on its last legs, soon to be a second class province of China.
That’s the news biz for ya.
They’ve discovered that we love to be scared nearly to death (that’s why we go to see horror films), so anything they can slant in the direction of gloom and doom, they will. It’s just packaging; and come on – we’re all in sales: we know you can package or spin almost anything any way you want. The info-tainment people (what we used to call “the news”) want as many viewers and readers as possible and they believe spinning the economy into the dirt will do that for them.
Walter Cronkite would not be pleased.
I don’t buy the vision that it can only get worse from here. I believe positive change is already occurring and will only accelerate in the months ahead. Instead of devastation in the housing market, I’m looking for (gulp! dare I say it?) a housing shortage!
For six years, we’ve barely added any new housing units at all. Each year we’ve created less than 50% of the new homes and condos we have historically needed just to keep up with the demand of new buyers coming into the market and obsolete units being demolished. Today, while we have substantial inventory of resale homes (including REOs) , we also have a home building industry at a near total stall. Nobody’s building anything. When the tipping point of low interest rates and rising consumer confidence is reached (and it will be reached), I expect buyers to flood into the market, quickly deplete the resale inventory that is there and clamor for more. Honestly: we could suddenly be in a sellers’ market!
Let’s define a couple of time issues. First off, when. I don’t know? Late 2012? mid-2013? Nobody knows when homebuyer collective consciousness will give the signal and the multitude of people with jobs and credit will emerge. The other time issue is the word, “suddenly.” How “suddenly” will we roll from an inventory glut to a sellers’ market? Relatively quickly compared to the six years it took to get us to this point. A year, maybe.
I posted a NAR Research piece from Lawrence Yun documenting recent declines in inventory on Facebook earlier today and chimed in with my housing shortage prediction. Steve Vincent from Help-U-Sell Triad in North Carolina responded with a street wise perspective:
James Dingman: At Summit, I talked about the potential for a pending housing shortage. For six years we’ve created very little new housing and when the tipping point is reached and buyers flood back into the market, a shortage could develop quickly. Mr. Yun adds fuel to that fire.
Tom Burdine: That is probably true, but it sounds amazingly impossible right now!
Steve Vincent: I’m concerned that at the first hint of good or improving news there will be a rush of new listings from people who have postponed marketing their home. No one talks about that potential ‘shadow inventory.’
James Dingman: Don’t you think we’d have to see a 10% or more increase in values before fence-sitting sellers came back? My guess is most are waiting because they don’t think they can get enough for their properties. What they’re waiting for is for values to return, but that’s going to take YEARS.
Steve Vincent: Certainly truth in that, but my day-to-day experience makes me think there are plenty of sellers just avoiding the long, slow market for reasons other than current value. Many just don’t want the hassle in what they perceive to be a losing situation. In our market the “move-up buyer” has largely disappeared. Combination of reasons: job insecurity, waiting for the market to bottom before purchasing, avoiding marketing their current home. I think there are lots of these would be sellers who are just waiting for good news – a better mood. My guess is the election could turn the tide for these folks.
James Dingman: Ah – so the real world (that’s you) sees a lot of sellers in ‘Hibernation’ during this economic winter. When the thaw begins, and when they rush in, we’re going to sputter and lurch like a cold Model T. Ok, I get that. Sometimes, up here where the rubber meets the clouds, we can miss the nuances.
Steve Vincent: I think hibernation is the exact right term. When these folks return to the market it will have a supressing result. Hopefully, their numbers are less than I fear.
Hi James. Through fresh eyes I see your point. Perhaps I was being overly pessimistic – seems to come naturally these days. I was looking at it from an appreciation point of view – additional sellers will keep values down. You, on the otherhand, were looking at it from purely an activity perspective – an increase in transactions. Ultimately, we may both be correct, and in a set fee world the more transactions the better. So.. Cheers! And, happy Thanksgiving!