Should We Let the Market Fall?

There's a very interesting article on the front of today's NYT business section about the differing predictions as to future real estate prices, and what to do about the flailing state of demand. Some experts think that real estate has been overvalued for the past couple of decades at least, and that the medium-term future upside will be limited to minor price increases. Those people often believe that we are at the beginning of the dreaded "double dip", and that real property prices will drop again.

Other experts feel that real estate is a luxury good, and that people will spend more on housing if they can. As my most recent prior blog would indicate, I'm in that camp. Especially when you consider the age of the baby boomers, I believe that they will "nest" over the next number of years, spending as much as they can on houses where they feel that they could live in retirement, and where their children will visit them. That would argue for higher values, at least for premium properties. As people spend less on food, they are going to spend their excess income on something, and I'm betting on housing over travel (not as easy as it used to be), cars (not politically correct), and clothing (ditto). Housing is where you can express your individuality without looking like a conspicuous consumer.

If you believe this scenario, then housing will improve as soon as consumer confidence rises and remains higher. For more on governmental intervention, I have an idea about that, too, so tune in next time.

Last Call

The Wall Street Journal had an article about buying a house for your child for Christmas. I guess it's appropriate that such an article would be in the WSJ, but it's an interesting idea and deserves some thought!

However, for the average person, it's time to think about buying a property as a holiday gift for yourself. If you hurry, and really move on the mortgage and the inspections, you might even get in for the New Year's celebration. We bought our current house that way. We signed the contract around Thanksgiving, and moved in the weekend before New Year's Day. We even thought of the purchase as a present to ourselves, since, at the time, it was our second home. Many people now do that--buying a vacation home now, with the idea that you might retire to it, is increasingly common with baby boomers. After all, how many socks and sweaters do you need? Putting all the gift money together, and doing something big with it, is likely to be the present that you remember--and enjoy--longest of all.