Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Nothing Can Fix the U.S. Housing Market

Housing-Market / US Housing Jun 01, 2010 - 08:08 AM GMT

By: Kevin_Duffey

Housing-Market

The government could force mortgage rates across the board to 2%, it won’t matter.  They can re-introduce a tax credit worth $15,000 for anyone buying a house, it still won’t matter.  Don’t you get it?  You can’t fix housing with artificial demand.  Tell me where you can find enough buyers of homes that have money for a down payment and who can purchase a home without government incentives, and then have the job and income security to not be at risk of not being able to afford to live there. 


Sure there’s a handful of those folks running around these days, but don’t you think they are already in homes?  Where are the new buyers?  Hint: there are none.

If you read past the headlines, you know that even though there was a flurry of activity in April due to the expiring tax credit, that foreclosures and delinquencies were at record highs.  Look for the trend to continue through 2010 and probably 2011 as well.
Where is this going?  Well, it’s not going to be pretty.  I think the following trends will continue to increase over time:

  1. More vacant homes - It’s incredible how some of the nicest neighborhoods in my area have vacant homes scattered throughout the neighborhood.  They’re easy to spot since they usually have dead grass with weeds everywhere.  Some homes have been vacant for multiple years!  Some with no power so the air inside is stagnant and disgusting.  The longer these homes sit, the more money it takes when someone does buy it just to get it into liveable conditions.  Compounding this issue are the stupid home owners associations who will prevent a sale until they collect back dues.  Rather than encouraging someone to take over the home and starting paying dues to the HOA, they will block the sale in an attempt to collect thousands in back dues.  Ridiculous.
  2. More people living in their homes and not paying for it - This trend is going to skyrocket for two reasons.  First, the economy will continue to struggle and people with a lack of income simply won’t be able to pay their mortgage.  Second, the people who have money are fed up that their neighbors are living in the same home as them, yet not paying for it, so they figure, screw that, I’m not paying.  For more on the strategic default option, click here.  What the end game is for an increasing trend of people not paying their mortgage when banks are already overwhelmed with foreclosures, it’s tough to say.  I honestly think eventually it could get to the point where people live indefinitely in their homes without paying, I’m talking 5-10 years or more.  The lack of resources to force these people out or do anything about it might enable such a situation. 
  3. Continued weakness in home values - If we’re talking real values, home prices will continue to drop.  Guaranteed.  If we’re talking nominal values, they will probably decrease but could eventually increase.  How’s that work?  Well with enough inflationary policies and incentives, government could possibly stabilize housing in a nominal sense, but they would be creating pure inflation.  Consider the following extreme example: if government decided to print enough money to pay off every single person’s mortgage, home values would skyrocket.  But, the policy of this would be purely inflationary and cause your purchasing power to get crushed.  So how do you determine the true value?  While not perfect, consider determining how many ounces of gold it would take to buy your house.  Now track that number and the change in that number for the next ten years.
  4. Abandoned areas of cities - Detroit recently announced that they will be bulldozing 15,000 vacant homes.  In cities like Detroit where the economy is in shambles, this is a situation that will likely pop up in the near future and people move out of the city, get foreclosed on, etc.  Look for this trend to expand outside Detroit.  Perhaps a post-Lebron James Cleveland??

As you can tell, I'm extremely bearish on housing.  There are just too many issues facing housing for any sustainable recovery.  It's best for you to view housing as an expense, and like any expense, you should do your best to limit it.

For investors looking to potentially play this trade, the S&P Homebuilders ETF (XHB) is a potential short opportunity.  Shorting has been a difficult game for more than a year, so you must be cautious when shorting.  Banks should also be an area to be avoided with continued weakness in real estate.  For aggressive traders, a short of the Financial Sector SPDR ETF (XLF) might be an opportunity.

By Kevin Duffey

http://20smoney.com

© 2010 Copyright Kevin Duffey - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in