Some may consider me a pessimist, but I’m not. I’m just a realist when it comes to analyzing the housing market
I was looking through some of my housing data just now, and something hit, that I really haven’t paid much attention to…the tremendous loss of real estate values (homes for this post) that we have all suffered ($6-$7 trillion), and what effect will this have on home sales and the economy going forward.
Everyone in the media and real estate brokerage is focusing on a new theme of affordability, yet there is very little being said that affordability isn’t anywhere close to being a solution to the market crisis that still looms over every one of us…not just sellers.
Almost everyone who has purchased a home since 2002 has lost money, and some have lost And that holds true even for homes purchased today.
Since 2001 almost 100,000 homes (single and multi-family) have been sold, and every one of those homes have lost value…and a major percentage of these homes are underwater. And this is just for the homes sold.
This table not only represent Bergen County home sales, but more importantly it represents the number of people who have purchased homes since 2001, and who have lost money on the homes they purchased…and that’s almost every sale on this chart! And this chart is only for homes sold below $2 million.
The Wall Street Journal and a few other media outlets have started writing about this issue, because they’re starting to see the light.
This is a huge issue. Underwater homes are the reason why the housing inventory is so low…homeowners simply can’t sell their homes for less than they’re worth, because they don’t have the money to make up the difference between the two amounts.
So it’s great news that prices are rising, and inventories are low, but this is only a temporary thing. It won’t last. There is a difference between the current low inventories of homes that are for sale…and for those homeowners who either want to sell their homes or have to, but can’t because their values are underwater. And this inventory is the killer that’s lurking right in front of us, but is being ignored.
I love how the media has picked the side of the home buyer and affordability to write about, and miss a much larger problem that needs to be dealt with, before a recovery can take place…namely those who own homes and can’t sell them. A recovery can’t happen until the underwater problem is resolved. The problem won’t magically disappear.
What effects will this have for our local home markets in Tenafly, Alpine, Cress,kill and Haworth? We’ll soon see.