For almost 5 years now many homeowners that have been thinking about selling have opted to wait for better days. This strategy has failed miserably as evidence by price drop of up to 40% of many real estate markets. Yet, many prospective homeowners continue to employ this strategy forever thinking “next will be better.” Now as prices appear to be leveling off the question remains “is waiting for better market conditions finally a good strategy?” If you’re a homeowner hesitant to accept lower prices and get on with your life consider the following:
- The Debt Ceiling Debate and U.S. Deficit– has created tremendous uncertainty and almost led to a U.S. default on debt and severe economic crisis. It may take years or even a decade to resolve U.S. deficit issues making a recovery of real estate prices less likely.
- Economic Growth – recent revision in GDP growth in 2011 has downgraded forecast to 1.7% in 2011 to 2.3% in 2012.
- Mortgage Delinquencies – according to LPSC, there are presently 600,000 bank-owned properties that have not been released for sale, 1 million foreclosures in process, and 4 million homeowners 90 days or more delinquent, in the U.S. You do the math and calculate how long it may take to get to normal housing inventory levels. As the economy weakens expect even more mortgage delinquencies.
- Unemployment – lower growth also means higher unemployment, less income accumulation, lower resolution of foreclosures, and lower consumer confidence. Unemployment is expected to remain above 9% and remain a drag on recovery for many years to come.
- New Housing Construction – the weak economy, high unemployment, and glut of housing inventory, will continue to depress new home construction for quite some time. Fewer homes built means fewer jobs created leading to an even weaker economy, ultimately creating a vicious cycle.
- Business Recovery – businesses are lean, efficient, and have substantial cash reserves. Don’t expect businesses to lead a recovery as economic uncertainty has led to slower business investments.
- Credit Rating Downgrade – recent downgrade of U.S. credit from AAA to AA+ are almost guaranteed to lead to increased lending rates at some point. Fanny Mae and Freddy Mac downgrades by S&P almost guarantee higher mortgage rates in the future. Imagine how higher mortgage rates will impact future housing prices.
- European Debt Crisis – the same issues that have led to serious questions about the European Union being able to manage its debt, exist in the U.S. The recent escalation of problems in Italy, Greece, and Spain act as a canary in the coal-mine, warning that the U.S. economy is heading down the same road.
- Pent-Up Seller Demand – millions of homeowners have chosen to wait for better days when a recovery finally does arrive, it could take years to absorb all of this extra inventory.
Japan – it took Japan nearly 20 years to recover from an economic meltdown in ’90. Are you willing to put your life on hold for 20 years before better days