News from the housing front indicates that house prices are rising.
This sounds like good news for home sellers and bad news for home buyers.
It looks like good news for home owners, except for property taxes. But when you are self-deluded, you regard your home as your number one investment. It isn’t. It’s an expense.
If it were an investment property generating rental income, OK. But it isn’t.
How good is the good news? Are you a buyer? Bad.
How accurate is it? Bad. That’s good news for buyers. There is still light at the end of the tunnel. There is still a silver lining.
It’s going to rain on sellers.
The Case-Shiller index for housing prices in 20 U.S. cities saw home prices up on average 2.3% in June.
June is the beginning of the buying season. The index is for 3 months.
The National Association of Realtors says that home sales were up in July over 9%, year to year.
Case-Shiller was up from May 2009 to May 2010, but then it reversed. That’s because the tax subsidy ended: the First-Time Homebuyers Tax Credit.
As the financial markets insider blog ZeroHedge has pointed out, the robo-signing scandal that broke in late-2010 slowed the pace of foreclosure activity by roughly a third. RealtyTrac data suggests a 1.6 million home foreclosure backlog at present. Add this to the roughly 2 million foreclosures currently in progress, according to Barclay’s Capital research, the 1.5 million to 4 million homes that are at least three months behind on their payments, and the 10 million mortgages that remain underwater and candidates for defaulting down the road, and you get headwinds of several different storms coming together to create a potential foreclosure hurricane headed right for the shores of today’s supposedly bottoming out housing market.
Is unemployment falling? No. Then how will first-time buyers buy? They won’t. Then how will people in underwater homes get on top of the water? They won’t.
In 2011, 27% of the sales were to investors. Will they sell? I doubt it. Why should they? They are generating positive cash flow. As people get evicted, they must rent.
Will mortgage rates stay under 3.6% indefinitely? No.
Is it time to start shopping for an investment house? Yes. But read John Schaub’s books first: www.JohnSchaub.com.