5 Things It Will Take For Housing To Come Back

The housing market has been in a prolonged slump and shows very few signs of coming out.

I think that housing can come back.  Here are a few things that I think need to happen in order for the housing market to improve.

Actually, let me start with a few things that shouldn’t happen:

  • Stimulus / Government Intervention – The market has too many problems to be corrected by government intervention, and the government can’t afford to throw money at this anymore.  No more bailout programs.  No more tax credits.

Actually, that’s the only one.

Now I can get to the things that need to happen for the housing market to recover:

  1. A reality shift – People need to realize that the number one reason for having a home isn’t about how much equity you have.  First and foremost, a home should be about providing stability, having a place for your family, and some place you can take pride in.
  2. A realization that ‘new’ isn’t everything – Everybody wants a new house.  Nobody wants a house over fifteen years old because it’s too old, too hard to maintain, too much work.  Unfortunately, there are tens of millions of homes out there that are older than fifteen years, and until people see the value in occupying these homes, there will be too much supply and too little demand.
  3. Time – They say it heals all wounds.  It might take many more years before the wounds of the housing market are healed, but time can heal this.  It took us many years to get into this mess, and the problems aren’t going to sort themselves out.  We’ve become a society of instant gratification, but this simply isn’t possible for the housing market.
  4. Pride in ownership – Too many people think that because their house has lost value or because they bought their house on the cheap that it has to look cheap.  I never understand how someone willingly lets a house get run down.   Every person buying a house should commit to taking care of the landscaping, making repairs as needed, and fixing things that get broken.  These things used to be pretty much given for people that owned a house, but somewhere along the way, it became acceptable to have a race to the bottom on who could have the trashiest house on the block.
  5. A correction somewhere else – Right now, if someone has $40,000 laying around, many avoid housing because they can get better returns in the stock market, in oil, in gold, in silver, or a variety of other things that are providing better returns.  But, everything is cyclical and eventually one or more of these things will provide less attractive returns, and real estate could come back in vogue again.

None of these things are going to happen overnight.  I could be a pessimist and say that some of them (especially number 4) may never happen.  I will, however, be an optimist and say that maybe they will and if they do, you’ll see an improvement.  Bottom line, though, it will take time.  And patience.

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8 thoughts on “5 Things It Will Take For Housing To Come Back

  1. I think it will also take a realization by individuals that they may need to move to find a better job. In San Diego, where I live, home prices have still been going up, as there are a lot of employment opportunities in the region. However, in places like Detroit, there will never be enough jobs again for the glut of homes they have.

  2. I think Time, like you mentioned, is the biggest factor. People who have been foreclosed on need time to rebuild their credit so they can be buyers in the market again. People who have lost their jobs need time to get back on their feet and get back into the market. The banks need time to heal their wounds and feel comfortable lending again. Just takes time, it will come.

  3. I personally think the biggest gains in equity are found in the older homes. The cost of upgrading an old home, especially in a world where contractors are begging for work, more than pay off for themselves. Find a diamond in the rough, polish is up, sell it at a premium. You might have to sit on it for a bit but, the pay off is worth it.

  4. Yesterday's downgrade of US Debt will certainly hamper the growth of Housing as a whole. I hope President Obama is quick toreact and take corrective measures on the same

  5. I've never managed to figure out the rage for new houses…the result of canny marketing by developers, I guess. Here in the Southwest, new housing is junk. A new house is basically a Styrofoam cup on a slab, slapped over poorly prepared soil.

    Know what Styrofoam does? It burns. Try it with your next sodapop cup. Just stay back away from it when you set a lighter to it. Then call your insurer and ask what it costs to insure a new stick-built structure vs. what it costs to insure a masonry structure of the same size.

    I've been in model homes where the bathroom door wouldn't clear the toilet, where corners were not square, where the framing wasn't nailed together (!), where kitchen counters weren't level. And those were the models! Just imagine what the buyer actually got.

    A friend in the trades got a job working for a company that went in behind developers and repaired the stuff that either was done wrong or didn't get done at all. He described rain blowing through poorly finished walls, bad plumbing, bad electrical work, bad roofing, roof vents where you could see the sky through the roof because no flashing had been applied…and on and on.

    Yeah: I had to replace the water heater on my 1972 house. I redid the floors (because I happen to prefer all tile). I bought a new dishwasher and a new fridge and replaced the annoying shiny glass stovetop with a swell new gas stovetop. Eventually I put on a new roof. But I never had to undo outright bad or dangerous construction. And if a fire starts in my attic, I'll have time to get out before the place goes up in flames. Meanwhile, the shade trees in my neighborhood are full grown and my central location means I never have a long commute.

    We need Americans to move back into the cities. Maybe as they realize those suburbs are just instant slums, they'll wise up.

  6. It's not prices that matter when deciding if an investment should go up or down, it's actually valuation because this makes housing looks attractive. One measure of this is the ratio of housing prices to average incomes.

  7. The impact of the so-called recovery will impact real estate values in American cities in very different ways. Very few American cities have seen real estate prices tumble like those in Flint, Michigan. Hundreds of homes are available at prices less than $10,000 in a market that has been devastated by de-industrialization.

  8. I think that low-cost housing will be sustainable in the future. Low cost housing that is in line with environmental planning will be most essential.

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