American Home Buyers Are Smarter Than You Think

As of late there has been a lot of concern about the current American housing situation. Proponents of the recovery are claiming that it will take time for the housing recovery to get revved up (yes things always turn around if you give it enough time), while opponents of the housing recovery are suggesting that the recovery is nonexistent. I happen to fall into the later category for one simple reason; American’s may be lazy and fat, but they are not stupid when it comes to big purchases.

When an individual or couple plans to buy a home, they do not go out on a whim one Saturday and make that purchase. The purchase, no matter what tax bracket, is calculated and well thought out. Though the individual home buyer may not be as knowledgeable as the experts in the housing field, they spend a lot of time considering a home purchase (6 months to a year), then say a burrito for lunch. This suggests that home buyers have been watching the declining home prices for quite some time. Why would a home buyer sell their home to buy another home if they are going to lose money? Why would a new couple put their life savings on the line to purchase a home if it was only going to lose value? Why would investors purchase homes if they were going to lose capital? No matter how the cake is cut, no one is rushing out to purchase homes until we see a reversal in this dire trend.

Another subject that deserves being touched on when discussing the lack of a housing recovery, is the businesses affected by the housing industry. No I am not speaking of Home Depot or Lowe’s. I am speaking about everything from Best Buy to Pier 1. When consumers purchase a new home, or new to them, they usually have more space to fill. How do Americans fill their empty spaces? They buy, buy, and buy more and more stuff. So until we see a huge push of Americans buying homes, don’t expect every industry in the United States to do stellar. There is a clear relationship between big business and the housing industry that has been prevalent for 80 years and no matter how bad investors want financial markets to shove off this relationship, the relationship remains steadfast.

Posted on by Young Gun in Uncategorized 7 Comments

7 Responses to American Home Buyers Are Smarter Than You Think

  1. Anonymous

    Where is that picture from?

     
    • Young Gun

      Pittsburg, California. Though I can walk down the street and take a similar photograph.

       
  2. Steve Lawrence

    I think you are right on this. What do you think the elections will do to this dragging economy? Let’s assume it will be Obama vs. Romney.

     
    • Young Gun

      The current economic situation was due to factors (mostly) outside the presidency and he same can be said about the recovery (mostly). In the upcoming election both parties will attempt to convince the masses that they can and/or have fixed the economy. The reality of the matter is it is out of their control. So in turn the election is irrelevant and one must focus on the cold hard facts at hand.

       
  3. Anonymous

    I think some home buyers may be smarter than some think…but the big reasons no one is buying is because they either don’t actually have the money (jobless, etc) or they can’t get the credit due to more traditional requirements (proof of income, more $ down, etc). If people could get no proof of income loans again, maybe even more would be trying to ‘buy’ homes because either the gov’t will whip up a program to help them later or they would just not pay since they could probably get away with that for many months.

     
  4. Anonymous

    The last great housing boom was organic. A large group of vets returning home from WW2 with money, young wives and an urge to start a family and home front. The recent one was speculative and occurred right before the Baby Boomers entered retirement age. Poor timing maybe. I believe that we will have serious challenges on our hands as we work through this bubble of the retirees to active work force participants ratio. Housing, wages, inflation and stock markets will all be adversely effected. This bulk of retirees that is about to shoot out the end of the labor market firehouse will also be a huge drain on the equity markets. As they begin to draw there retirement funds, the market will devalue, possibly causing a race to withdraw first to maintain asset value. The socio-economic waves caused by the skewed age curve will take a long time to settle out. Economic conditions will likely be volatile for some time.

     
  5. Stock buyers

    If individuals could get no evidence of earnings loans again, maybe even more would be trying to ‘buy’ houses because either the gov’t will beat up a system to help them later or they would just not pay since they could probably get away with that for many several weeks.

     

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