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:
- 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.
- 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.
- 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.
- 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.
- 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.