August 25, 2006
Investors Trying To Run
At the end of 2004 the US national homeownership rate reached a record 69.2%, and at the end of 2005 this rate dipped slightly to 69%. In other words, in 2005 – which was the strongest year for existing US home sales on record – there was no increase in the overall homeownership rate. Why was the US housing market so strong in 2005 if the rate of ownership declined? One word: INVESTORS.
Suffice to say, with the speculators that dashed into the market in 2005 now trying to unload their spoiled investment at the same time the homebuilders are using more and more incentives to try and spur sales, the outlook is anything but good. Rather, it will likely take a decline in US home prices before a notable increase in ownership rates can transpire. Assuming the real estate speculators do not start acting sell-crazy, this adjustment could in fact be orderly. But remember, despite all the negative news on the housing market this week, the needed price adjustment in home prices has yet to begin.
The homebuilders have built plenty of houses, but who is going to show up and buy them?