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.