There are many different pieces to the puzzle, here are a few more.
Jiji has posted this thought a couple of times:
Housing is broken, Agents , insurance, remodelers , landscapers, finance, escrow, builders etc… the list goes on and on. What must never be said,
YOU WILL NEVER HAVE AN ECONOMIC RECOVERY UNTIL THE MAJORITY OF UNDERWATER HOME OWNERS ARE NO LONGER UNDER WATER.
I’m not sure we’ll recover any of the old economy; instead those who are creative and desperate enough, will find a new way to get by. It will need to be independent from housing, because once the underwaterness is resolved, those who are left probably aren’t going to be moving much either.
1. UP OR DOWN-SIZING – Price-wise, to move up or down, you need to change by 50% or more to make it worth it.
It doesn’t make sense to sell for $600,000, and buy for $750,000 – you don’t get enough extra house to make it worth it, and the closing costs are prohibitive. But even if the costs got down to 1-2%, very few homeowners need a slightly-bigger house. Don’t be surprised if you see in the future a JtR-supported remodeling enterprise to assist those who just need an extra bedroom or two.
2. DOWN-DOLLARING – Sellers who want/need to bank some real money will have to leave town.
Those hoping to cash-out will need to leave town, and possibly the state, to net a few hundred thousand dollars. How many homeowners are willing to leave? Those buying now are here for the duration, so the down-dollarers who do leave are part of the cleansing. How many weak hands are left? Admittedly, it could be a large group, but they will likely hang on as long as possible.
3. MORE RENTERS – There is going to be increasing pressure on rents.
Those in both the categories above who do sell, will try to stick around, and renting is a great temporary option. For many it will be permanent, especially those who have family here because as they get older they aren’t going to leave town, just to buy a house. Others moving here from out of town will prefer to rent, mostly because of the difficulty with buying smart.
Upward pressure on rents will impact the good-looking family homes in quality school districts.
According to Wiki, baby boomers control over 80% of personal financial assets and more than 50% of discretionary spending power. Do they have one more move in them? I don’t think so – after investigating the three categories above, many, if not most, will end up NOT moving, and make due with that to which they’ve become accustomed.
There will be great reluctance to selling from now on.
Hopefully we’ve learned a big lesson in this downturn, and people will be more reluctant to load up on debt too.
Which leaves just the out-of-towners, and first-timers, for homebuyers.
Those underwater are just part of the equation, and may just help with expediting the inevitable.