Housing Bulletin
Housing Bulletin: Sellers, Stay Home
Do you want to help heal the U.S. economy? Don’t list your house for sale this year.
That’s the main point I took away from the Chicago Association of Realtors’ Regional Economic Forecast 2009, held January 15th at the Palmer House. The panel, which I moderated, featured presentations by three economists and a leading Chicago real-estate analyst. The consensus among them was that the key to a housing recovery is getting more people confident that this is a good year to move.
“Let’s get buyers back into the market to absorb [housing] inventory,” said Lawrence Yun, the chief economist for the National Association of Realtors. Yun and others talked about various ways to do that—such as publicizing data that show housing is far more affordable now than prior to the boom, and by making the $7,500 first-time buyer’s tax credit, a temporary measure, a permanent addition to the tax code.
One panelist, Michael Miller, a professor of economics at DePaul University, warned about a potentially counterproductive move by home sellers. Miller noted that many homeowners who may have wanted to sell in the past few years wisely sat it out. But once the real-estate market shows signs of improving, those same people may put their homes up for sale. “I’m concerned that when this group enters the market, we will see another supply problem,” Miller said.
Homebuilders, Miller pointed out, slowed or halted their production of new inventory last year and are unlikely to start up again in large numbers until they see the current stockpile thinning out. But individual homeowners aren’t quite so attuned to their role in the supply pipeline, and a sudden inundation of those for-sale homes could hinder any real-estate rebound. Yun added that the number of homes lost to foreclosure—and then put back on the market—may also increase with mounting job losses. That would add even more supply when demand is still weak.
Demand for homes might improve when potential buyers respond to the new, low interest rates (which Yun says may drop even lower this summer), and when they see any signs in the larger economy that will make them more confident, the panel said. That may take some time. “Pessimism is so thick you can cut it with a knife,” said James Glassman, managing director and senior economist at J. P. Morgan Chase & Co.
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Reader Comments:
"Demand for homes might improve when potential buyers respond to the new, low interest rates, and when they see any signs in the larger economy that will make them more confident, the panel said. "
the problem is that nobody has that 20% to put down (and the pristine credit score) to take advantage of those rates...
what's worse, many THINK they have that 20%+ equity in their house... until they get that appraisal.
it's not 'confidence' - it's economics. it's supply and demand. it was a bubble. biggest one we've ever seen. it's going to take forever to bottom and then it will not bounce - it will at best keep up with inflation.
The earth has moved under the feet of the Chicago and National Association of Realtors, yet is is clear they persist in tired analysis, cliches and passivity.
The logic that real estate is just the financial paper that describes it, the premise that the paper must originate with merged broker/banks, the spin that the functional but personally profitable failure of the broker/banks must domino into the dysfunctional and personally disasterous failure of the asset holders is cellophane economics.
That logic has resulted in dessimation of the real estate market, professional ranks, suppliers and (now we are advised) the self-denying hord of existing inventory. That logic has resulted in the establishment of a click-to-buy or roll market as large as the remaining traditional real estate market, the disintermediation of the real estate profession and the destruction of real value.
How wonderful for substitute investments where value is solely resident in the paper that describes it.
Perhaps it is time for everyone to take a fresh look at that first dollar bill they hung on the wall, before they use it for a dollar meal. It bears the image of the man who saw the same logic in 1776-89 when Fleet Street, London practiced the same game to stall the founding of America. The solution then and again requires vision of the larger picture, a sea change and replacement.
Perhaps it is time for the President's home town, free of the liability of major bank headquaters, to lead the dialog and founding of that replacement. Dirt, bricks the broad shoulders to put them together are still r e a l and estate. Their core value is not described by paper, but by the intrinsic means they provide for the pursuit of every other element in the American Dream.
My view is that the Dream, the energy it frees and the opportunity for those who rise rather than hide & hord are renewable and boundless.
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