Saturday, March 19, 2011

Oph Topik: 3 Housing Recovery Denials

Each Saturday the Echo Boom Bomb features a post impertinent to Echo Boomers.

In the financial industry, we hear a lot about a possible housing recovery. In fact, the trite sell line for housing is, "It's a buyer's market because, pretty soon, houses are going to cost much more." However, in order for housing prices to rise, there must be a significant demand, and I see three major encumbraces to the housing recovery.

1. The Millennial financial data. Remember, Echo Boomers are the second largest American generation in U.S. history. However, from reviewing the data, does it look like they are ready to buy homes?

2. If oil prices continue to remain high, or climb higher, even current homeowners will feel the financial pinch. And Americans, who don't own homes, won't consider adding another financial obligation. With high energy prices, renting provides the flexibility for a person to move where it's close. If they lose Job A, they can move closer to Job B. A person, who owns a home, cannot move anywhere - they are restricted.

3. Uncertainty is dominating the market. Look at the rise of food prices alongside oil prices. If people feel like they won't be able to afford food or energy in the future, they won't commit to homeownership. When I talk to people who are ready to buy homes, they feel financially stable in their lives. If instability and uncertainty continue, people will continue to avoid any homeownership commitment.