If you believe housing is on the rebound, take a very hard look at the numbers. There are 140 million personal residences in the US. Today, there are 26 million homes either directly or indirectly for sale. According to a survey by Zillow.com, a real estate appraisal website, 20 million homeowners plan to sell on any improvement in prices. Add to that, 4 million existing homes now on the market, 1 million new homes flogged by companies like Lennar (LEN) and Pulte Homes (PHM), and 1 million bank owned properties. Another 8 million mortgage owners are late on their payments and are on the verge of foreclosure, bringing the total overhang to 34 million homes. In all there are 35 million who are underwater on their mortgages and aren’t buying homes anytime soon, nor are the 35 million unemployed and underemployed. That knocks out 50% of the potential buyers. Add to this, the reality of 80 million baby boomers retiring at the rate of 10,000 a day. Assuming that they downsize over time from an average 2,500 sq ft. home to a 1,000 sq. ft. condo, and eventually to a 100 sq. ft. assisted living facility, the total shrinkage in demand is 4.3 billion sq.ft. per year, or 1.7 million average sized homes. That amounts to a shrinkage of aggregate demand for a city the size of San Francisco, every year. As the state and federal first time buyer tax credit, disappears, long term capital gains taxes and state and local property taxes take a jump and diminish property’s appeal. And the last straw could be reduction of home mortgage interest deduction. Add it all up, and there is a massive structural imbalance in residential real estate that will take at least a decade or more to unwind. Not much left for a home owner? http://www.theurltool.com/?8156
Best regards
Martin Crawford
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