Real Estate: What is Happening & Why?

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I just discovered a fantastic blog (William Olson’s blog) for anyone who wants to learn more about the economy and why today’s housing market is stalled. William is an “urbanologist” and author, with his work published by the Chicago Tribune, International Journal of Economic Development, in other words, a respected economist.

Like many other people, I’ve been affected by the slowdown in housing. We bought a condo in January, 2007 before we realized the boom was over in NH … and paid 2 mortgages until we sold our beautiful (but too large with no more children at home) home in Portsmouth, 15 months later.

When researching how long it might take to sell our home, I first learned “a lot longer” than homes priced at the low to mid-range of the market. I also saw that home sales in the prior 2 years were double that of earlier years. My interpretation was families who would normally be moving up, had rushed in and done so ahead of schedule. Based on this research, I believe if were could plot home values over 10 years, we’d see the housing bubble, and more important that home prices are settling back down to the more traditional 5 to 6% annual appreciation curve. I’ve never felt things were as bad as the media suggests and William’s post supports this.

From William’s post, Anatomy of a Housing Depression, explaining my idea more eloquently.

“The extraordinary expansion of credit that fueled the boom in housing has finally begun to ebb and is leaving a satiated market and inflated home values in its path. The period of easy money during the expansion had the twofold effect of, first, cajoling an enormous number of households into the market over the past several years, many of whom, incidentally, would now be entering a “buyer’s” market, and, second, revving up the value of homes. In other words, a smorgasbord of loan products and investment speculation crammed ten years worth of housing demand into about five years of purchasing and flooded the market with so much capital that home prices were bid up ten years worth of appreciation in five years of time.”

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