Real Estate Speculation...People often knock the "speculators" who are "responsible" for this housing mess that we are in. It just isn't so... or perhaps it would be more realistic to say each and every one of us is a speculator... whether you buy real estate or not... so take that log out of your own eye first. |
From the American Heritage Dictionary, first definition
a. Contemplation or consideration of a subject; meditation.
b. A conclusion, opinion, or theory reached by conjecture.
c. Reasoning based on inconclusive evidence; conjecture or supposition.
Dictionary.com, "speculation," in The American Heritage® Dictionary of the English Language, Fourth Edition. Source location: Houghton Mifflin Company, 2004. http://dictionary.reference.com/browse/speculation. Available: http://dictionary.reference.com. Accessed: October 19, 2009.
The reality is that _ANY_ plan for the future is speculation.
Has anyone ever asked you, "How long do you plan to stay?" Pure speculation. I plan to stay five years, providing I don't get transferred, get another job, get laid off, etc.
What do you expect unemployment to do in the next five years? When honest people bought their homes in 2004, who knew we've be at 9.8% unemployment nationally in double digits in many of the states? If unemployment keeps rising, maybe we'll see more foreclosures.
Today a potential homebuyer might be wondering how the increasing mortgage delinquencies, mounting foreclosures and shadow inventory are going to rock their world. Did you know that the government programs are enabling some owner occupants to have their interest rate reduced to as low as 2% for the next 5-years. If the banks could handle the resets, maybe there will be a halt to future foreclosures. But perhaps this has just shifted the problem to the right by five years.
For years we've heard, "Interest rates are at historic lows... buy now before they go up." This is a chant I still hear today, "a little bit louder now," because a) they can't remain this low forever and b) we're headed for hyper-inflation.
With the expectation that our government seems intent on printing money as a way out of our national problems, the concern over inflation (even hyper-inflation) is credible.
• Hyper-inflation could shoot home prices to the stars as a great hedge against inflation. Let's go buy up all the foreclosures at fabulously low interest rates as fast as we can.
• But then, interest rate increases could bring home prices down.
Everyone of is betting on the future. And because there are so many unknowns, we simply assume that things will go on much the same as they have. Some will bet that housing is a good investment and buy while others will bet that it is better to rent and decide not to buy. Such "reasoning based on inconclusive evidence; conjecture or supposition" makes us all speculators.
To reply to the angry critics before they get started...
To be certain, there were those speculators who fell into the fourth definition:
d. Engagement in risky business transactions on the chance of quick or considerable profit.
But, the mess we are in today was not caused by the few "Type D" speculators. Like most automobile accidents, it was a culmination of little things that all added up.
Food for speculation...
Federal Reserve Board Delinquency Rates Soar Exponentially
No Shadow Inventory of Bank Owned Homes
Recession is over; Depression has just begun
The Effect Of Unemployment Upon Housing For 2010
San Diego Home Sales Continue Normal Pace for September 2009
San Diego Homes for Sale - Median Home Price drops 7.24% in last 12 months
San Diego Homes for Sale - Months of Inventory - October 2, 2009
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