Monday, October 30, 2006

How Bad the Housing Market Will Get

For homeowners who aren't planning to sell, the market likely looks just fine.

If people are planning to stay in their home for more than the next 12 to 18 months, I don't think they're feeling the nervousness.

It's always the people who are facing the issue to sell. They're moving, they may have some other changes in their life, divorce. Those things cause more anxiety around home values.

Many homeowners are likely still enjoying recent gains. Even with a dip in market values, they're probably still finding positive equity gains over the last few years. From that standpoint, it's still a very positive feeling.

What we've always noticed is it takes consumers a while to perhaps understand what's really going on in the market.

By the time some consumers see the housing market in a negative light, it may be time to change their minds again, that the housing market will only see a slight dip.

The economy is not very strong, but if it continues with some positive growth and if interest rates stay stable over the next year or so, we will see the housing market towards the end of 2007 start appreciating again. Not very much, but it could start appreciating again. The danger is in this next 12-month period. There are a lot of what-ifs: What will happen with inflation, in the job market.


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