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Monday, May 19, 2014

A look into a housing inflexion point brought on by a dysfunctional real estate market

You would think that with all the surefire bets in housing that people would be dialing up their realtors and heading out every weekend to make those lustful multiple offers presented in PowerPoint format on properties. Yet the overall market data shows a different story. The house horniest of them all, investors, are clearly pulling out of markets including sunny and inflated California. Apparently home prices do matter when making investment decisions. Cash strapped hormonal buyers will keep on buying but housing prices are set on the margin. That margin is becoming razor thin on current volume. I find it interesting that the biggest housing supporter of them all, the National Association of Realtors is also somewhat tepid on this recovery. Why? Because home sales volume is pathetic. Keep in mind they make money on selling and buying. Volume is key. Their model doesn’t work so well with banks holding onto properties like Gollum holding onto the ring and the foreclosure process being dragged out like the forever college student enjoying year 10 at Santa Monica City College. You see this overarching trend occurring in many metro areas across the country. Investors have been propping up the market since 2008. They are now slowly pulling back. You are also starting to see a convergence of analysts putting out their predictions on how overvalued housing is and backing it up with mountains of data. The other side of the argument points to prices. Sure, they’ve gone up but value is created by actual price and that is sort of the point. The answer as always isn’t so simple but using your thinking cap it is important to understand that housing is not a “no brainer” decision in this market.

Still going into massive debt

It is interesting how corrections always follow a similar pattern. At first, every market in every area is going up. The euphoria stage. Idiots can buy and make out like bandits. Of course they attribute this to sheer mental agility versus blind luck. Ask the 7,000,000 foreclosure recipients and question them about their mental agility in their buying decision. Slowly the winds change. All of a sudden sales start slowing down. Prices stagnant. Those house horny sellers are not getting their delusional asking prices for simply slapping on a new coat of paint and installing some stainless steel Whirlpool appliances. Didn’t the housing cable show say I would have 10 above list price offers by the first week?


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