What Does The Future Hold For The Strength And Liquidity Of Housing?

Posted by Colin Doyle June 13, 2010

Image courtesy zizzio.com
The Pro:

Real weakness in the market, or simply put "the glut" of homes for sale will eventually allow a NATURAL market bottoming/price discovery. Pricing homes to sell while giving less certain investors the confidence to get back in.

As the overall economy improves real estate will once again be seen as a solid long term investment in the most stable resilient economy in the world. In short a stable economy will create an appetite for more investment/risk.

Home prices will potentially decline as the fed tightens interest rates (they can't get any lower right now) If the price decline can offset the rise in rates, or even price homes significantly more favorably, then this could be a boon to the strength of the market as long as buyers are there.

The government has shown it's commitment to a stable and strong housing sector. This doesn't hurt your chances of obtaining special funding, credits, and help from other types of government incentive programs.

The Con:

The 8K tax credit will soon expire.

The federal reserve can't keep rates this low and the rate increase will potentially price out buyers who are on the fringe of being capable borrowers.

Unemployment is at historically high levels.

Banks have reduced their exposure to riskier borrowers. Even decent loan applications are getting declined.

Lack of demand in the secondary/securitized market for mortgage debt.

Renting makes more sense then buying when u calculate the rental value to the buying cost.