By Sara Huebener
I was excited to find that on Wednesday morning, David Crook, a national real estate expert, was featured on the KQRS morning show. Mr. Crook wrote a book, of which an excerpt was published in the January 18 Star Tribune. After listening to Mr. Crook and reading the excerpt, I have two comments: 1. He had some valid points, and 2. He is truly what he claimed to be - a national housing expert.
I admit I have not read his book. Based on the KQ broadcast and the excerpt, one thing I do not recall Mr. Crook illustrating is that housing is local.
Mr. Crook states that "today's problems do clearly signal that home owning can no longer serve one of the roles it has had for the last 60 years - as American's principal means of building wealth". He admits that for the foreseeable future home prices are likely to remain stagnant or continue declining. While I agree with the latter statement about the stagnancy of home pricing, at least for a period of a few more years, I question the rationale in his statement about homeownership failing to be the primary means of building wealth for Americans.
It all begins with a glance at the modern consumer. Many American consumers have unquestionably developed a need for instant gratification. Many homeowners experienced rapid appreciation in their homes, and used the anticipated equity as a virtual ATM. People bought boats, cars, financed vacations and pulled out cash, reliant upon the expected appreciation of their home as an eventual means to finance these non-appreciating items. The unexpected downturn in the housing market left many upside-down on their mortgages.
Consequently, I disagree with Mr. Crook's philosophy that housing will no longer serve as American's principal means of building wealth. Regardless of home prices and values, Americans cannot build wealth if they cannot live within their means and if they fail to keep spending in check. I understand that the housing price issue is far more complex, but this is an important point regarding using housing to build wealth.
Mr. Crook discusses that this could be the greatest buyers' market in U.S. history. I concur, and for additional reasons than alluded to in the excerpt. Absolutely, the baby boomers will leave buyers with an ample supply of housing inventory as they begin to downsize. Additionally, the creative lending strategies imposed by lenders in recent years left hundreds of homeowners in foreclosure, which has driven down home pricing in local markets. I'm not sure I agree with his statement that buyers have years in which to save money "before home prices start to tick up". In stating such, Mr. Crook is predicting a continuing decline in housing for decades to come. And this is a claim that neither he nor I can make.
I could write all night about the excerpt from Mr. Crook's book, and the parts that I agree and disagree with. But I have one parting thought, going back to my earlier comment. Housing is local. Mr. Crook tells first time home buyers to take 25% off the price they paid for their homes and to count on this hit when they attempt to sell their homes. Housing is local. Every pocket of the Twin Cities housing market is seeing different rates of depreciation, if any. 25% is highly arbitrary. It may be higher in other areas, and lower in yet others. Edina is seeing virtually no depreciation, for example.
To wrap up, don't let the media, including the national "experts", scare you. Pending sales in Savage are on pace and higher than they were in the winter of 2007. Furthermore, this is January in Minnesota. Instead of selling a home, Minnesotans are thinking about Netflix, a good pot of chili, and the spring market. If you are thinking about buying or selling and/or concerned about the value of your home, consult a local Realtor. Far too much news about the housing market is spewed to the national audience without regard to what is happening on a local scale.
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