I suspect over the next 30-60 days it will become ever clearer that we are still in the throws of painful real estate correction. Over the next several months I expect several things to happen:
1) Delinquencies to continue higher (Currently 9.6% this likely goes to over 12% and maybe as high as 15%).
2) Prime mortgages will continue to fall behind in increasing numbers
3) Building new homes should continue to stay low
In addition, the more I look at the additional tax credit available to move up buyers ($6,500) I am struck by who this will and won’t help. Because unless you sold years ago and been sitting as a renter (if so good for you) who would want to sell a home and buy another one? I am guessing most people feel the home they have is good enough given the loss they have felt or seen in the last several years. Maybe if you bought back in the 80’s you could have the equity to think about trading up but it has to be a small pool of people available for the new credit.
As for the 8k tax credit they did such a good job of being non committal on extending it that almost everyone and their brother who could qualify did purchase a house already. And as we know they can’t buy another primary residence so the additional pool of buyers is lower than say in the summer.
I don’t know how to get around my fear of a tidal wave of supply coming just as demand dries up causing prices to reverse coarse and fall again. Simple supply and demand means prices will have to fall to clear the market.
But as a buy and hold investor you should be ready to pounce because I suspect we are in or about to be in the best buyers market of our investment lifetime.
Good Investing
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