Experts predict that housing will bottom out, finally, in 2009
Financial experts are predicting that the U.S. housing industry will finally bottom out by the end of 2009. It can then begin a hopefully slow and steady recovery.
Getting to this point, though, isn’t going to be easy. According to a story by Bloomberg, by the time the housing industry does hit bottom, home values will have fallen a whopping 36 percent since the housing slide began. This means that a lot of sellers will have either given up trying to move their homes off the market or will accept a possible loss on their sale.
Let’s hope that this long housing slide has taught everyone involved in the real estate mess a valuable lesson: Homes are not short-term money makers. They’re a place to live. And, while they’re being lived in, they’ll probably appreciate in value. But they’re not designed to double or triple in value in three years.
And that, really, is what lies at the heart of the housing disaster: Housing prices went up too high, too quickly. The appreciation wasn’t real. It was getting to the point where no one was going to be able to afford to purchase a house.
Mark Zandi, chief economist with Economy.com, said that housing prices should begin to recover by the end of this year.
Sellers will certainly be happy to hear this. According to data from the National Association of Realtors, the prices of existing homes fell from an average high point of $230,200 in July of 2006 to $175,400 in December of last year. Funny thing is, that $175,400 figure is a much more realistic one that the $230,000 number. The average price of housing should never break the $200,000 level. If it does, it means that housing is out of the reach of too many buyers.
During the housing boom that started in 2001 and ended in 2006, buyers stretched themselves financially to get into nice homes. Mortgage lenders approved them for adjustable-rate mortgage loans that came with starter interest rates that were far too low, and then adjusted to higher levels. Once the adjustment took place, homeowners could no longer afford their too-expensive homes. It’s why we are seeing so many foreclosures today.
The housing mess is a self-created disaster, one forged by the combined greed of homeowners, mortgage lenders, real estate agents and appraisers. If any of these folks had acted wisely as a group, the crisis might have been avoided.
It’ll be interesting to see what happens after the recovery. Will we have learned our lessons? Or can we expect another housing crisis in 10 years?
