SIX REASONS THE REAL ESTATE RECOVERY WON'T....RECOVER, THAT IS...SOON!

By
Real Estate Agent with Thomas Waite Real Estate Broker
http://actvra.in/c5P

A middle-school teacher always told his class (I was in it) AN OUNCE OF PREPARATION IS WORTH A POUND OF CURE.....get prepared for the next leg of the American Real Estate Adjustment...

I have written, many times, and dealt with ALL of the items on Morningstar's Bearemy Glaser's list, however, he has hit ALL SIX CYLINDERS of the current real estate economic situation (story below).

The last item on his list is the one I consider the most important and most devastating.  When interest rates increase...

AS THEY MUST...SOON...

the real estate market MUST adjust downward because...

RICH FOLKS ARE NOT GOING TO LIVE WITH THE PO FOLKS...AND THE PO ANIN'T GONNA LIVE IN THE CENTER CITY...

Too simplified? 

Ok, when the COST of something (houses goes up) and there is ALREADY little or no demand for that something (houses)...the PRICE goes DOWN...not up.

Here's Bearemy's article:  First she short sweet version...

This week, we will look at six reasons why demand isn't likely to pick up."

1. Unemployment

2. Household Formation

3. Shadow Inventory

4. Underwater Mortgages

5. More Stringent Mortgage Requirements

6. Rising Rate Environment

Now, we'll view the entire article to see why all of this makes sense...it does to me...

http://news.morningstar.com/articlenet/article.aspx?id=383192

CNBC predicts a second dip in housing sales which means more foreclosures and more displaced homeowners. Google March 23rd Gary Schilling interview.

California has a 900 mile coastline and NO ONE is capable of building anymore coastline. The Los Angeles Basin is bordered by the mountains on the east, the Pacific Ocean on the west, San Diego on the south and Malibu on the north. The warm desert breezes run into the cool ocean breezes and create a Mediterranean climate that everyone in the world to aspires to experience. However, right now, California real estate is experience the same downturn that every place in America is currently experiencing.

The farther down the property values descend during this economic slowdown (the Great Recession of 2006-2020?) the more properties which will fall below the "underwater line". This means that the loans on the property are larger than what can be paid by selling the property at current market value (CMV).

Apartment Building Investments in Orange County CA are going to be a spectacular move in the very near future and will begin their upside value appreciation as the single family market continues to deteriorate. The more homeowners who lose their homes to foreclosure or short sale, the more apartments will be needed. Building new apartments in North Orange County, CA is nearly out of the question because the cost of small vacant parcels makes the cost of new construction prohibitive. Over the past 20 years the Cities have created such stringent "off street" parking restrictions that most of the older 4 Plex sized parcels no longer qualify without a costly building code "variance".

So, buy Orange County Apartment Buildings before the prices and interest rates go up, again. Call me Now!

 

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Tom Waite

THOMAS WAITE REAL ESTATE BROKER

PO BOX 3205,  CYPRESS, CA 90630

714-895-2174 Direct; 714-398-8292 Fax  Tom@TomWaite.com

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Ambassador
785,377
Charlie Ragonesi
AllMountainRealty.com - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

I think if we could eliminate any one of these valid reasons the under water one would be the one I vote for. this would allow folks to sell and follow jobs thus helping on all the other reasons you list. You are i am afriad to say correct in your assessment

June 08, 2011 11:19 AM #1
Rainmaker
617,392
Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

It isn't a pretty picture but one that is pretty much accurate as scary as it is!!!

BTW....love Cypress.....spent many a weeknd at the swap meet at the college!  it has been a few years but used to attend often when I lived down there!

June 08, 2011 11:22 AM #2
Rainmaker
1,033,209
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Tom you are unfortunately on the right track until all these points improve Confidence will remain Tepid at best. What is helping sales are the Foreign Buyers who see these fantastic price drops coupled with the weak dollar which is a buying recipe for an out of country buyer.

June 08, 2011 02:44 PM #3
Rainmaker
597,112
Yolanda Cordova-Gilbert
David Weekley Homes - Katy, TX
David Weekley Homes in Cinco Ranch

Tom,

          This is a very interesting blog unfortunately I too feel you are right. Endre is right the weak dollar is bringing foreign buyers but what about the American dream to own your own home. Another point is the banks need to take their hit and write down their loans to what are really collectible.

June 09, 2011 07:44 PM #4
Rainer
50,384
Ann Bellamy
Hard money lending for investors in NH and MA - Tyngsboro, MA

I agree with you, Tom.  I think the price recovery will be a long time coming.

June 12, 2011 08:05 AM #5
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Rainmaker
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Tom Waite

So Cal-Apartment Bldg Investments
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