why are people not buying houses

[Moonstruck]

I am curious. Today we have almost historically low interest rates yet houses are not being bought in high volume. In 1981 the year averaged 17% mortgage rate. It went as high as 18.5%, yet we still sold houses. The economy wasn't booming, but there were corporate transfers that had to find homes. Today there is little of that. I just wonder why the buying mentality is to follow the herd. When the herd starts buying, costs and rates will go up.

In the early 1970's when inflation was high, and mortgage rates were about 10% people were buying because they were concerned about what prices could be in the future.

Right now it is the best of both worlds. Mortgage rates are low, and prices are relatively low. Just wonder why more are not buying.

 

[Ski in NC]

Lots of folk got stung when prices dropped and they became upside down. Impossible to sell without taking a huge bath.

I think folks consider it may happen again and then they are stuck.

Also many consider there is a low risk of future inflation, so the hedge value of ownership is less.

 

[MyBad]

Here in the Calif Bay Area homes are selling with multiple offers. No inventory. So sez my wife the Real Estate agent..

 

[CPseudonym]

Don, after having my ass handed to me in two different "historic downturns" I've found it easier to buy growth stock mutual funds. They're liquid and stupid easy to "reasonably predict" the performance of.

I would love nothing more than to buy a half dozen brand new 4-plexes or even sfr's especially with the cost of capital right now. But waiting for the fed or congress to make the next stupid change is maddening. At least these interest rates keep the stocks soaring and the right strategy can limit exposure for the next correction.

My 2 cents and worth far less.

 

[O C Diver]

Think sales are regional now. SW FL (Fort Myers) is booming again. Sales are strong, inventory is low, prices have steadily been rising for the last 2.5 years, and building is picking up. Lee county (Fort Myers) was the foreclosure capital of the USA for a number of years. This growth though is more likely retiring baby boomers than sub 50 families.

Ted

 

[Moonstruck]

Think sales are regional now. SW FL (Fort Myers) is booming again. Sales are strong, inventory is low, prices have steadily been rising for the last 2.5 years, and building is picking up. Lee county (Fort Myers) was the foreclosure capital of the USA for a number of years. This growth though is more likely retiring baby boomers than sub 50 families.

Ted

Ted, Florida is a strange market. When the market turns around I think retirees see it as their last chance to get their place in the sun. Other markets are indeed spotty. Some are still cleaning up foreclosures.

Herd mentality can create frenzies as in some spots of California. That can really push prices.

Craig, I can see your point. The rental market is hot for your stated reasons plus ruined credit from foreclosures. The low interest rates are a two edged sword. They hurt seniors who have saved. After paying taxes on their interest earnings, their returns are less than inflation. That pushes the stock market. I have enjoyed for the last few years lower interest rates on our development loans. Slower product turnover has negated what would have been gained from lower rates.

What is the new "normal"? I don't know, but those businesses that fail to adapt are doomed to failure.

 

[FF]

Folks got wise to the home price VS inflation game.

Home prices follow inflation very closely.

The home owner tax advantages may leave , and deducting a 3% rate doesn't do much for folks tax bill.

Homes are not liquid , and today's educated labor market realize companies don't give a damn about employee loyalty .

So they don't give a damn about the company and will move to wherever they can get the best deal.

The 40 year employee and the gold watch were superseded by the co's planned bankrupcy that dumps pension benefits every few years.

Smart employees can read .

 

[MyBad]

The rental market here, is hot. Hardly any places to rent. There plenty of rentals, but nothing available.

My wife works with a few investors, and there is opportunity, but again, multiple offers is the norm right now.

Some areas are getting back the "ridiculous" with regard to pricing.

The "Bank Owned" inventory that once had plenty of homes sitting vacant, are all but gone.

I know a few people, that do property checks. They had 100's of distressed properties to check, and made some good money doing it.

The pay for each property check, has dropped in half, tells me that trend is coming to an end.
MB

 

[Capt. Jon]

http://rt.com/usa/156800-americans-economy-unemployed-work/

Here is one answer!

 

[Shrew]

Also consider building trends over the decades. Look at what was being built in the 50's 60's and 70's. Now look at what was built in the 90's through 2010. Cape's, splits and Ranches (think Levittown) is where things really started. In the last 20 years the demand from the baby boomer population is such that builders would rarely build something under 2,500 sq. ft. with 4 bedrooms.


Now the baby boom bubble is on the backside with a good portion having entered or are entering retirement and trying to downsize. People beginning their life are competing with baby boomers for smaller properties and there is a glut of large houses on the market. I'd expect this trend to continue.


Real Estate is not what it was 20 - 30 years ago. I am not considering the equity in my house as part of my retirement package.

 

[Sailor of Fortune]

Most of Florida is a sellers market. Normal inventory is 8-9 months, current inventory in Jax area is around 3 months. My wife is a realtor (sucky job) and we rehab house and also wholesale to investors and landlords. Good house in good areas will sell quickly if READY to sell. Newer roofs and HVAC are the items that keep buyers up at night. If you provide a clean home with newer roof and AC system, it will sell...usually for top dollar.