For the past 5 years the media, and many people who should know better, have been flapping their gums about a housing crises. Somewhere in the misty past, this column mentioned we did not have a housing crises, but rather a financial crises that affected housing. So, with resale inventory plummeting around the United States, let’s get our definitions straight.
A housing crises is a situation where there is not enough places for people to live, at least not the kind of places that are considered desirable or obtainable by any given buyer (or renter, but let’s not complicate things here). Desirable means many things, such as location, type, size, price, support services, etc. The fact that there is an abundance of available housing in Colorado Springs is not a desirable situation for the buyer trying to find a home in Ft. Collins. Economists and marketers call that “place utility”. If our generic buyer absolutely needs a 2 story on 2.5 acres, that is “form utility”. Can our generic buyer make adjustments based on preferences? Of course. REALTORS seldom sell the buyer the exact house they want to buy, but rather a house that meets the most variables possible for the buyer.
The supposed housing crises was really a financial crises that was caused in part by an excess of money and almost nonexistent real property securitization standards. In other words, most anyone that wanted to buy a house could, pushing prices beyond reasonable. When the money market collapsed, so did housing values, which fueled the recession.
Today, we are now looking at a situation where there are too few homes for the number of buyers. Underwriting (security) standards are very tight, regulation designed to protect the public are rampant, but pent up demand is pushing prices up yet again. The difference today as opposed to 2005 is that while money is cheap, it is not nearly as accessible. Many homeowners that would like to sell do not yet have sufficient equity to do so (the underwater syndrome), and the building community is not geared up to address the demand.
In the short term, maybe through 2014, inventory will remain low. That means multiple offers on many homes, difficult appraisal situations, and prices rising. Some that want and can buy will not be able to do so because of the discouraging competition, many potential sellers will remain on the sidelines because of employment uncertainty, and the rental market will remain strong.
Not a crises. Except for those buyers that simply cannot find the right house in the right place. It will be an interesting spring and summer in Denver.
Nicely put… and yes, the regulators are working overtime! I am not finding it difficult to obtain loan approvals for my clients but I am finding it almost impossible to wade thru the thousands of pages of new and contradictory regulations that I am charged with knowing in order to operate my business. As you know, I love what I do, that is to say, serving borrowers, I feel though that I am operating in an incredibly hostile environment. The CFPB is the fasting growing agency in the US and while on the surface it’s intent seems well and good, the regulators are clueless. Ok… no more grumbling, have to preserve my strength for the undewriters… Thanks for a nice article.
J
Nice article, Amy! Like to see more of the uninformed have a chance to read your words. A lot of media misinformation going on out there. Didn’t know you were a Cowboy. I’m an Angel myself…………however in a totally different generation. Crosstown rivals!