Employment and The Future of Home Ownership

Califo
ia Home sales peaked in May 2005 and crashed in January 2008. Will it take the housing market ten or twenty years to correct?

Texas housing values crashed in the end of the 1070s. Texas required ten years to recover. Past United States recessions were shorter than our present one. In some cases, prices of homes didn’t decline, even during the recession.

When recession hit Japan in the 1990s, Japan did what we are doing now. The Japanese government kept throwing money into the banking system, refusing to change the existing lending structure, and Japan struggled for twenty years to stabilize home prices .

http://www.attaincapital.com/alte
ative-investment-education/managed-futures-newsletter/investment-research-analysis/326

Employment failure appears when the economy is already in trouble. In June, 2010, Califo
ia's Unemployment rate is 12%. Going back as far as 1990, the highest unemployment rate in Califo
ia was 10.3% in January of 1993.

As far as the housing sector, loss of employment always comes first. Without an income stream, you can’t make your house payment, no matter how much the payment is. If you can’t make your house payment, and you lose your home, you can’t buy again for a while and the values of your neighbor’s homes decline. The downward spiral begins.

According to the recent Califo
ia Home Ownership Rate Census, in 1985, 54% of U.S. Citizens owned their homes. At the housing value peak, in 2005, 60% of the people owned their homes. Therefore, the rise and fall of 6% in home ownership reflects one measurement of our country in a tailspin.

Another article quotes home ownership numbers differently from the figures given above. The U.S. Dept. of Commerce, Census Bureau, issued the previous statistics. The article quoted below, was published by USA Today in June 2010, and states:

“Fresh projections say the rate (of ownership) could plummet to about 62% as early as 2012 and almost certainly by the end of the decade. Homeownership rates haven't been that low since they hit 61.9% in 1960.

The share of households that own their homes has been sliding since the housing bubble burst in 2006. The rate fell again in the second quarter of this year to 66.9% — the lowest since 1999 — from a peak of 69.4% in 2004, the Census Bureau says.”
http://www.usatoday.com/money/economy/housing/2010-08-02-1Ahomeowners02_ST_N.htm

Either way, the numbers of owner/occupants, are on the decline, due to the housing crisis and employment crisis. In addition, shadow inventory foreclosures threaten to quickly decrease home ownership even further.

With government tax credits offered as an incentive to buy, home ownership continued to fall in 2010. Foreclosures are expected to take over a million more homes in the year 2010. Census records disclosure more moves due to evictions.

Although we receive reports of prices flattening out, such as this Data Quick story, the hidden numbers mask the number of homes, that should be in foreclosure now, but whose occupants have lived in their homes, without making payments, for a year or more. In no way is this good economic news. Please click below for the complete Data Quick story.

http://www.dqnews.com/Articles/2010/News/Califo
ia/Southern-CA/RRSCA100713.aspx

About employment: Although plenty of buildable land exists, with which to satisfy Califo
ia’s housing shortage, the land is not usable energy efficient space. Costs of commuting also dictate where an employee can afford to live.

Employment security is what is missing today. People buy homes when they have income stability. As an employee, you are subject to economic whims, and today even historically sound companies fail. Instead of being homeowners, people may have to be tenants, simply to keep pace with changing locations of their employers and employment opportunities. The days of easy-quick home sales are over.

We have lost a decade of home appreciation. House payments and home prices are back to where they were in January of 2000. If you bought your home for shelter purposes alone, you are in the minority. Most Califo
ians bought their homes for investment purposes as well as shelter. They also put substantial money into their homes, like adding a pool or adding another room. However, even if your home is only worth what it was ten years ago, as long as the payment hasn’t changed, you may still be happy and secure.

If you purchased your home at peak prices, in 2004 through 2007, you were hard hit by the loss of market value. Today, you have to decide, similar to the way the government decided, if paying twice as much for your home, as your neighbors are paying now, makes economic sense. Are your house and your personal credit too big to fail (lose), versus saving half your house payment for thirty years?

Lastly, if you, or your company, has guaranteed, good steady income, and your credit scores are high enough for you to purchase another home at a low price, do you really want to buy now? There is always a risk in planning for the future, but even more risk today. The economy and housing prices are very uncertain. Is today’s price good enough? Would you better off waiting it out?

If you buy now, you had better plan to keep the home for thirty years because, if home values get worse, buyers could be hard to find. On the other hand, you have to live somewhere, even if we are in a recession; it’s very likely that Califo
ia’s population will increase in the upcoming years. A true real estate entrepreneur would take this opportunity to be a landlord for the large number of people who will need to rent. Just remember, gambling is fun, as long as you can afford to lose.

Other reference sources:
http://www.lao.ca.gov/laoapp/main.aspx
Legislative Analyst Office

http://www.census.gov/hhes/www/housing/hvs/qtr210/q210ind.html
US Government Census

http://www.census.gov/const/www/newressalesindex.html
New Residential Sales