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Housing...The Final Leg Down?

publication date: Mar 22, 2011
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author/source: Chris Prang
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As stated repeatedly on this site, housing has been in perpetual decline since 2006. There is no double-dip because housing prices have not returned to what they were in 2006. It's been one big dip that continues to get deeper. So are we now in the final leg down?

Eighteen months ago they (the government, FED, Realtors, etc.) told us housing was stabilizing and things were getting better. On the other I and many others have claimed all along that housing is still in decline and will stay that way for quite a while.

Basically what housing has done is, fallen off a cliff, landed on a ledge...doing a dead cat bounce and then rolled off the ledge continuing its decent to the valley below. Think Wile E Coyote.




The Headlines Tell The Story


Existing-home sales dive, prices near nine-year low

"WASHINGTON — Sales of previously owned U.S. homes fell unexpectedly sharply in February and prices fell to their lowest in nearly nine years, an industry group said Monday."

February Home Sales Plummet As Housing Market May Have Further To Fall

Don’t Hold Your Breath for Residential Real Estate

Building permits fall to all-time low


Eventually or hopefully the decline will stop. But when will that happen? I don't forsee that happening until the following occurs:
  1. Foreclosures subside considerably
  2. Foreclosure, distressed and vacant properties get on and come off the market...that could be years!
  3. Unemployment goes down
  4. People need to relocate or want to move
What concerns me is what will happen 10-20 years down the road. The first Baby Boomers are now turning 65 and will continue to turn 65 for the next 18 years with the peak occurring around 2020. What will they do when it comes to housing? This, I believe will be the driving force of the housing market over the next 10-20 years.

The housing scenarios for Baby Boomers are:
  • Stay right where they are. Now that the value of their homes and investments have decreased, the likelihood of them moving to sunny Florida has decreased.
  • Downsize from their family home to a smaller home or condo. Doing this will cause an extra glut of family homes on the market, thereby depressing the value of them.
  • Sell their home and move into a retirement community. This, for many will be impossible because of the costs of retirement and assisted living facilities. But there will be plenty of people who do choose that option. This will also cause a glut of single-family homes on the market.
  • Sell their home and move in with their children. This is the most financially prudent thing to do and my hunch is that many will choose this option. I also know that this is the most biblical approach. Children are called to care for the aging parents, especially those that are widowed.
That being said, it could many, many years for the housing market to stabilize. There are other significant factors that will affect the housing market. They are:
  • Increased, legal immigration. The more people that move here, the more need for housing. For that to occur then the U.S. has to make it appealing for foreigners to move here.
  • Lowering taxes on both corporations and individuals. Lowering corporate tax rates should allow for companies to prosper more and hire more. Lowering personal taxes will put more money into the pockets of working Americans and give them a greater ability to purchase and afford a home. Lowering personal taxes can and will also encourage foreigners to move here.
  • Changing the attitude of America from a welfare state to a producing and saving state.
So are we in the final leg down? Meaning in the next 1-2 years housing will stablize. Hopefully, but not likely.

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