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2010-09-17 18:34:44

Why Home Prices Will Rise Sooner Than You Think

I have been arguing that home prices will come back faster and stronger than anyone thinks. I have been making the case for this idea for some time now. I know most everyone thinks I’m out of my mind, including a close friend in the business who we had dinner with the other night.
 
I’ve been making this argument because I see a serious inventory situation shaping up in this country, and when there is no inventory to buy, prices skyrocket.
 
I’ve heard every argument - why I’m a fool, a moron, an idiot, my crystal ball has holes in it, and it’s Bush’s fault.

However, with all that said, let me give you another part of my argument of why I see the home values returning faster than anyone imagined – if we ever get Washington in order again and if we get our economy righted.

Today, I read an article that I have read dozens of variations of over the last three years. The article discussed how many homeowners are under water on their mortgages. We are talking about 4.1 million homeowners who are underwater. These are homeowners, for the most part, who aren’t in foreclosure and are making every effort to stay in their homes, with the plan of not moving, and knowing that someday they will have their mortgages paid off.

This is another reason I see the values returning. The sellers can’t sell these homes because they aren’t at this time worth what a homeowner would have to sell for to pay off their mortgage and have enough left over to buy another home. As a result this adds to the inventory shortage.

Also today, I read an article which stated that August 2010 had the highest number of home foreclosures ever in a given month.  However, the banks are going to release these homes to the market slowly for the same reason I’ve been discussing. They know that an inventory shortage will cause home values to rise. The banks want to also see an inventory shortage knowing what I know. Prices will rise. This also adds to the inventory shortage.

I read another article today about a community in Southern California where the inventory is between 2 months and 3 months. And Surprise-Surprise, they saw homes values rise 11.4 % this year.

I guarantee you; I did not fall and hit my head. I’m not smoking anything funny, and I’m not blaming President Bush.

This economy will turn around. We will fix Washington, or vote all the bums out, and when we do turn this economy around, I would not be surprised if we weren’t down to a 2 or 3 month inventory in every desirable location in this country.

Only time will tell if I’m the biggest crack pot in this industry. So I ask you to watch this industry for the next two years. If we start seeing a 5% growth rate in this country, if we start getting the country’s debt under control, or at least not add any new debt, we will see the confidence factor for our country go up. When that happens, we will see people buying homes and second homes again, and when that happens we will see the inventory shortage become the next hot story, which in turn will create a demand. In our company, close to 50% of all buyer controlled sales are being bought with cash.
All of this portends a good time for our industry in the not-so-distant future.

Please don’t shoot the messenger.
 

 
James A. Crumbaugh III is CEO of Allison James Estates and Homes, a National Internet Based Real Estate Brokerage. You may reach Mr. Crumbaugh at jcrumbaugh@allisonjames.net
 

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