Here is some harsh reality from Bloomberg discussing the residential real estate market in the United States. The author argues that we may essentially be looking at a lost generation of property values. I don’t think that this is a far fetched prediction, but the time frame may be off. The majority of the national property values were based essentially on speculation and inflated regional markets. There was no real substance to support the valuations, and in fact, the prices exceeded all logic in most markets. These were trends which simply could not be sustained, and there is nothing to suggest a bounceback any time soon. So the reality may in fact be that we have simply lost significant value in much of the nations inflated residential markets. Maybe not for a generation though. We have seen through the Asian Monetary Crises and Peso Collapses of times past that we can look towards about a decade of hurt. This is true also of the great depression. Surely within that time frame society could adjust to principal lost. There is another factor which the author did not take into account; inflation. If (as we assume will be the case) interest rates turn towards an incredible rise, it will equalize losses seen in the past few years. While this should effectively dampen home sales, it will decrease the real dollar amounts of debts owed by homeowners.
The author does make some very interesting points about there being 19 million vacant homes in 2008. A significant portion of the countries single family residences no doubt, and a burden on any potential upward trend in values. Furthermore, he makes a point about Baby Boomers retiring their suburban lifestyles, and downsizing their primary residence. It is safe to assume that most individuals in this age bracket may also seek to unload any second or vacation properties they may have. The generation behind them, “X”, simply does not have the size or liquid capital to take the places of their Predecessors in the real estate markets.
Locally, we have known for some time that the Fort Worth region simply has not seen the destruction like other areas of the country. The author highlights this in detail, noting that some of the winners in all of this would be “southeastern states and Texas”. The simple reason for this, low costs of living and housing. Still, in the long term, with cities like Fort Worth continuing to sprawl ever outward, our peripheral subdivisions will most likely see value losses with time. We have built local markets that are dependent upon relatively high population growth, and we may begin to see those numbers dwindle. People simply cannot relocate if they can’t sell their homes in Arizona, Florida, California and the like. Perhaps the next notable real estate booms will be in centralized urban residences. We know that Dallas and Fort Worth are well positioned to cater to those needs.
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