Today’s Economy: Recovering or Still Recessing?

I’ve spent the past several days at the Next Wave Conference, a CAI seminar at Indiana University, sponsored by the National Auctioneers Association. I completed my CAI program here in the late 1970s, and I find my time renewing old friendships and meeting new auctioneers very rewarding. I spent my Sunday evening reviewing my notes from the afternoon seminar and reflecting on how this information will apply to the real estate market — both buyers and sellers — in the next several months and years.

The seminar began with several economic professors. Dr. Bill Whitte and Dr. Tim Slaper presented information on where the economy is going. They showed how the household makeup is changing — that the recession caused a decline in the formation of households.

Here’s a few of the notes I took:

  • Minorities will represent 70% of household growth.
    Normally 1.3 million to 1.4 million houses are in demand each year, but because that number hasn’t been reached since 2007, there is still excess supply.
    The housing market peaked at over 2 million houses per year in 2005.
    There is probably about two and a half years worth of supply in the real estate market.
    Second homes may take even longer to recover as families rebuild wealth.
    There were 3 million less households formed from 2006-2010 as there was in 2000-2005.
    Housing prices to income is lower today for ownership and rentals. It is now cheaper to own a home than to rent one.
    Housing prices are low compared to fundamentals, but they may still go lower.
    Because housing prices are below fundamentals, when the market turns, they can increase quickly.

So what does all of this mean to buyers in today’s market? It depends on your current situation. If you do not plan to relocate soon, with today’s low interest rates, it can still pay to buy now because rebound, when it occurs, could be very strong. Just like the stock market, it can be difficult to time the market; often, when you’re convinced it’s finally the time to buy, it is already too late and you miss some of the upside potential. In many areas, housing prices are off as much as 30%, which is a great value if you’re looking to stay in a house for the next several years. I still believe that, if you’re considering buying a property, now is the time to act.

What do you think? Has the real estate market reached its low, or are lower prices still coming?

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~ by Craig King on March 23, 2011.

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