Maybe it's the contrarian in me or me just not wanting to follow the masses but all this talk about the housing market continuing its rise from the depths of the Great Recession is making me nauseous. Not that a good hike up a stable but increasingly difficult mountain terrain is not in the cards for me, on the contrary, I would welcome the challenge. However, when looking at this housing market recovery and the basis for its climb, I can only think of those buying and speculating now as latecomers to the ascent of Kilimanjaro: the climbing party already left when the weather report was more opportunistic and it's not as rosy as it might appear at this point!
A review of my older posts would tell you that six months ago, I said we're in the eye of the housing storm. This followed my earlier blog regarding the impact on housing prices should interest rates double from historically low rates of this time period. Those posts still seem on track to me. But why not revisit this another time when things surely look much better than they did only last summer.
As I write today, we are seeing an historically low level of housing inventory in the Greater Sacramento area, housing prices that have jumped upwards of 20% or more from early 2012, Zillows forecasting the Sacramento area housing market to increase 11.9% in 2013 and the California Association of Realtors noting that 72% of active listings are receiving multiple offers. With all of this great news on housing (well maybe except if you are a buyer competing in this environment), how could one not buy? Why would anyone want to sell?
Well, to me, the 800 lb. gorilla is still hanging from the branches of the tree in the front lawn of every home in this country. Until that beast is subdued, housing as well as nearly everything else we hold true in dollar terms is in for a wild ride unlike anything we've ever seen before. There's just no way to relate what the future holds this time around based on the historical housing market cycles of the past. I truly believe the mess we're in is bigger than most people can imagine and housing to me will be one of the biggest losers when the main arterial branches of this "recovery" give way.
What are the main arterial branches? (1) The US Federal Reserve's ability to print money by buying US Treasury Bonds to keep rates artificially low and, (2) The US Federal Government's continuing burden of the citizens of this country with massive debt that far exceeds our ability to service let alone repay. So, historical market cycles of the past that didn't have this beast lurching through the front window simply must be dismissed from our thought processes. We are then left with a severe damaging blow as any homeowner knows when trees/branches overhang a property and the next big storm is not if but when.
I guess I would rather climb Pikes Peak in CO than a housing market that feels a lot like Mount St. Helen's in WA before its great volcanic eruption in 1980!
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