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What to do in the current economy for housing?

Lots of discusson about Idaho real estate and how things will turn out. I have heard everything from doom and gloom to peole talking about having a great year. The national economy is scary enough but local economy is definitely not waiting six months lag time like we normally do to react.

If you are paying attention to the local economy and real estate it is a mess. Foreclosure, short sales, Builders going out of business, realtors looking for jobs and the latest is that the developers are now hitting the wall as well.

Pile on to that, rising unemployment and the hole cost of living thing your insides start to roll. As if that was not enough people are having a heck of a time getting loans. Which is interesting because some people have told me it is easy if you can do the basics- 20% down, solid debt to loan ration and so forth. Another stresser is that appraisals are killing deals. Makes sense- today it is this price but tomorrow it is appraised $20k less.

I recently had a great discussion with a builder who was blaming banks for not lending. I think he forgot that for the bank it is just business. They are not out to solve the real estate problem, at least not individually. When they say NO" it is because it is policy to make money and if they see the risk as too great - "No Deal Howie" It is a complex problem. Good news there are people trying to initiate solutions, including me.

Here is the bottom line. If you believe that the bottom is still coming and you do not want or need a home- wait. If you need a home and have confidence that it will work out, now is a great time to buy a new home. Short Sales, Foreclosure, people motivated to sell are all opportunities. As always do your homework, network, talk to several professioanls and choose your team then wait to strike when the correct opportunity arises.

For those of you who just want what you want for whatever reason and are just living your life congratulations. Too many time people look at numbers to justify something. Though a home is a great investment- life continues.

Trey Langford
Founder

Posted by tlangford at 11/19/2008 3:26 PM

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Comments (2)

Re:What to do in the current economy for housing?

Trey, following your arguement lets ignore the part of buying as an investment. Besides with deflation confirmed by the CPI, and looking at historical metrics, its a straight-forward conclusion that the stock is overvalued.

So, to ownership for 'life' reasons. This is often a big selling point to the public. ...But, for all intents and purposes MOST people NEVER are homeowners...sure they sign a lot of documents, and take on 100% of the liability, but if the average loan is 30 yrs, and the average period of ownership is 7...well you are just renting from a bank versus a landlord. Look at the % of equity over the last 5 years...a record drop (~40% range)...so even as we created the largest % of homeowners, we created the largest group of people least likely to ever own those homes.

Bottom line, for MOSt people owning is simply renting from a bank. Whats the difference between renting from a bank versus a landlord (excluding the caviat we are not thinking of the investment)
1. Landlord assumes a huge liability for insurance, maintenence etc
2. Renter can relocate easily for family or work reasons
3. Renting should be much cheaper still
4. Renters have decent legal protection
5. Renters have cash flow for saving
6. Renters can move if school districts, taxes, gangs or crime stats change in their area.

For young readers, you might be surprised that historically, renting had a premium cost over owning because you got all the above benefits. This of course changed with the great NAR/American sales pitch of ownership and of course the view of debt as money and home equity as an ATM.

...but,but don't people get rich by owning houses,...sure and they do buying internet stocks, ag futures and selling dope. Real estate can be a road to riches because it is historically a place where leverage is plentiful and price appreciation is slow and steady. When houses become priced correctly I may buy and buy A LOT of RE, ...as for my personal choice now, I own (I sold RE assets but maintain one for complicated reasons) and I am a renter because it is a much better value and I enjoy the freedoms above.

Trey this country (and the world) have pursued the worst policies in this mess and I am therefore more convinced than ever we will now see a full on depression versus a serious resession. What will happen to housing with credit SIGNIFICANTLY tighter, gov layoffs, Micron and others closing shop, 10+% unemployment? No doom and gloom needed, one needs only to read the signs. Contrary, I am an optimist that we will see a world on sales, and who doesnt like sales :-)

Posted by emdeplam on 11/20/2008 5:11 AM

Re:What to do in the current economy for housing?

I agree with both sides of what has been said above. Home ownership is an investment and therefore has risk - which I think was a forgotten point during the housing run-up. Just like stocks have risk which was forgotten during the dot com bubble. We really are doomed to repeat past mistakes over and over... I guess that is human nature.

But I think that both of you have missed the largest white elephant that has ever walked into any room. Property Ownership Rights are being assaulted right now. With the Government buy-in to our large banking, credit, and lending institutions and the general greying of the lines between the Government and Corporations we are about to wake up to a completely new America. Without Property Ownership rights, emdeplam and Trey would not be allowed to voice the opinions above. Seem extreme? I don't want to risk it.

I see the current rush by our Government to "stabilize" the markets as a government gone mad with the opportunity to derive power. We, the citizens of this country put up with our Government because we have the right to quiet enjoyment of our property. Our Government puts up with us citizens because we hold the power of ownership of the country. As ownership transfers into the hands of the Government or Corporations, those rights become at risk.

10 Years from now, will the Government decide who gets to own a home? Will the government determine who gets to live where? I for one do not want to see that happen! Housing values go up and down, but the intrinsic value of property ownership must be protected - everyone must keep their eyes open and their mind sharp because what is happening right in front of us is nothing short of amazing. We are living in the most interesting times... don't be fooled by the "Depression" talk - it's at best a smoke screen to bigger issues. Our government is broke and they are going to be asking - or taking - the money from us if we agree or not. Don't let your rights be trampled because you don't want to feel bad - the Government will NOT make it all better. Debt may very well be a bad thing, but home ownership is far more than just debt - never discount your rights.

Posted by Anonymous on 11/20/2008 5:36 PM

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