The Housing Equilibrium

Everything in life seeks equilibrium and balance. It doesn’t matter what it is... everything seeks balance. If you work too hard you will get sick and you will be forced to rest. If you don’t eat you get hungry. When the government manipulates affordability in housing markets it throws off the true market equilibrium. Fundamentally the government was attempting to create a new equilibrium where are greater percentage of the population were home owners. We now know that though well intentioned this push had severe consequences.

I have written a fair amount on this subject before. However the attached article is a compelling reminder that false supports are preventing us from finding the equilibrium. Letting the market correct will bring real stability back into the market. Yes, prices will likely be lower but the footing will be firm. False supports will continue to promote indecision in the marketplace and the reality is that the market is seeking a true equilibrium in spite of these false supports... hence the drop in sales numbers.

See the URL below:

http://money.cnn.com/2010/08/31/real_estate/federal_housing_programs.fortune/index.htm?section=money_realestate&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_realestate+%28Real+Estate%29

Desk of Zach Trailer
By Lanny Berg

The 8K Tax Credit Aftermath...

Those who patiently waited are finding a tremendous buying opportunity, A few months ago I wrote about how those who did NOT buy during the First Time Home Buyers Tax Credit might be the ones who end up benefiting the most... Well, it looks like that was an accurate assessment. The tax credit has expired and home sales are dropping significantly. The reality is that I would rather get 40K off of a 400K home than pay 400K and get an 8K tax credit. Over 2 million first time home buyers jumped in and bought new homes during this subsidized period. For those that did buy it probably wasn’t a bad decision but it demonstrates the real weakness that exists in the market and that people were focused on the wrong thing; a tax credit vs. the actual value of the housing market. Those who waited will now have less competition as there are fewer people in the market generating less demand. There is the additional benefit that they are actually benefiting from historically low interest rates. Now really is the time to buy...

By Lanny Berg
Desk of Zach Trailer

Uncertainty is a strategic advantage...

I have written many times that California is unique and amazing when it comes to real estate cycles. With interest rates fantastically low and housing prices low as well (specific to local markets) in some cases it is indeed becoming less expensive to buy than to rent. This is a pure cost analysis and is more directed at entry-level properties but non-the-less it is happening. People wonder is “now a good time to buy”? Though no one can predict what the future will bring if you have the capability would you rather be in the market to buy now or back in 2007? >Warren Buffet is famous for saying be greedy when others are fearful and be fearful when others are greedy…

Desk of Zach Trailer
by Lanny Berg