September 2004 April 2011
I knew that I would be glad I saved the September 2004 issue of Fortune, where staff writer Shawn Tully warned that the for-sale housing market was bound to implode shortly. This month’s issue of Fortune features on the cover a follow-up article by Mr. Tully, where he now heralds the “Return of Housing”. While his analysis related to lack of new housing construction and cratering of prices over the last few years is sound, I can’t help but be skeptical about the snapping back of the non-Washington DC Metro Area housing markets just yet.
There are just way too many people still out of work outside of the DC Metro Area, far too few new jobs being created, and no major job creation engine in sight (what ever happened to “green”?). And I couldn’t help but notice that while Fortune purposefully reduced the height and width of its printed format over the course of the last 7 years, this month’s issue is literally half the page count of the September 2004 issue. One thing is clear: corporate advertising budgets have not returned to their pre-bubble levels (either that or Fortune has lost its desirability to advertisers, which I highly doubt).
So what do you think? Has Tully jumped the gun?
Totally agree,not to mention the issues with lenders and the new Condo financing guidelines…Yikes, we’ve barley come into the tunnel, yet see the light at the other end.
This is happening in Austin. Renter yesterday watched her rent rise $400 when she renewed. She is now looking for urban housing and finding a small inventory to review. Given this trend, we in Austin will not have inventory. Prices likely to climb.
Don’t agree with the single family home market or the condo market rebounding currently but it is on the horizon in strong markets like San Francisco. Apartment projects are starting to come on strong in San Francisco and the Bay Area. Even some condo deals are happening but they are requiring so much equity that they are not attactive to most developers.
If this were about the lack of short-run demand for housing, I would agree that Fortune has jumped the gun. But if we don’t build, as I’m assuming the article is inferring, then eventually in the long run demand will sneak up on supply. Many may point to shadow inventory as a hidden contributor to overall housing supply but we have to remember that the existing stock is aging, people not paying their mortgages may not be fixing their houses, and we don’t know how well REO properties are being maintained.
The argument is sound enough.
However, interest rate risk is the real issue.
In order for housing to come back, lending and employment have to come back. It’s pretty tough for even the best credit folks to get loans in the current market. I think we’re in for a more protracted (6-7 yr) recovery. That’s if the gov’t doesn’t pull the plug on Freddie and Fannie; in that case, it will be much longer. If you predict increases near the bottom of the trough; theoretically some day you’ll be right. Save this edition so we can discuss again in 2018. At that point “REAL” unemployment should be below 15%. See – Soc Sec revenues over the last 10 years for more reliable employment insight.