Five Reasons Housing Market Headed Down Further

Five Reasons Housing Market Headed Down Further

There's no way we have hit bottom with the housing market. If you have real estate to sell, you'e in trouble. If you want to buy - wait! Here are five reasons why.

A few years ago all of the economists said that the national housing market would never drop.  Last year was the first time in 40 years that it did.  And it's going to go down further, especially in markets which are overbuilt, over speculated, or overpriced - California, Nevada, Florida, etc.

There are several reasons why the drop will continue.  They include:

  • Sub-prime lending woes which will tighten credit across all markets.
  • Resets on adjustable rate mortgages (ARMS) will reach a peak in 2007-8 resulting in more foreclosures.  This will increase inventory on the market and depress prices.
  • Demographics.  Aging baby boomers are increasingly selling their suburban homes and moving into apartments or smaller condos.
  • Specter of rising interest rates.  Interest rates will most likely rise as inflation continues to increase.
  • Mentality.  The mentality of "housing always goes up" has been broken as it was in 2000-2001 with a rising stock market.  Once a bubble like this bursts, it works in reverse as buyers delay purchases in the anticipation that prices will come down.  This becomes a self-sustaining prophecy.

Even David Seiders, the chief economist for the National Association of Home Builders seems pretty gloomy:

http://www.marketwatch.com/tvradio/player.asp?guid={B96D16C8-2F6D-4503-ADD4-C8824371BB0A}

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

Comments

  • jeff simione

    August 17, 2007

    your all crazy the houseing market is created by and run by the realest agencys

  • Anonymous

    July 18, 2007

    In the cities perhaps it will blunt the impact. But the suburbs will be devestated.

  • Anonymous

    July 18, 2007

    Your third point - demographics - is actually what could save housing from a big drop in big cities, including NY, SF, Philly, and maybe Chicago.

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