How much higher can prices go? Are we moving forward or are we going backward? Personally, I don’t really know. It’s a really tough market to gage. Although I see the housing market creeping back to the 2004-2006 prices, people continue to buy. My question is where are they getting the money to pay such huge prices especially since lenders guidelines have tightened? We just may be headed toward another housing market crash.
I do not believe that the buyers in the market today are the average ordinary homebuyers…..they’re investors. This is the reason why the market is rising.
But let’s not forget the old adage “what goes up must come down.” Even though I don’t have a crystal ball to predict where the market is going, my common sense kicks in to tell me that as the prices rise we will be right back where we were. I think it will happen sooner than we think. Why do I believe we’re headed towards another housing market crash?
For the following reasons:
Reason 1: Hedge funds, flipping property, loan modifications, record low mortgage interest rates, limited housing supply are all great indicators that the housing market is on the rise. All of these factors are inducements to keep stirring up the market that has an immediate and productive effect, but it does nothing for the long term sustainable growth.
Reason 2: Investors are purchasing homes for high yields as a short term investment. However, as we witnessed in the 90’s when foreign investors came to the states to buy property they lost “big time” because they priced themselves right out of the market. They could not find renters for homes because it was grossly overpriced. The real estate market fell quickly, however it was not as drastic as the 2007 housing market crash. Nevertheless, in order to sustain a stable real estate market, we need biological homebuyers that will grow the economy gradually as our economy continues to recuperate.
Reason 3: To put it bluntly, private-equity organizations control the foreclosure auctions and purchase in bulk quantities with cash money. Transactions like this makes it difficult for the average and typical first-time homebuyer to compete with cash purchase. Clearly, large institutional type purchases will only drive the market up because they are competing with each other.
Reason 4: Lenders have started to tighten up their lending guidelines even more because they recognize that the market is growing out of proportion with private equity organizations and private investors. I believe that they have deliberately conspired to oust the average homeowner so that when the market crash comes around the average family won’t have to be put out of their homes again.
What do you think?