Future Value Behavior is Anyone’s Guess

Uncertainty Abounds
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Uncertainty Abounds

The Future is Uncertain – what else is new?

One of CNBC’s real estate reporters recently wrote an article discussing some recent conferences she attended along with other finance experts, where the future of housing and the economy was discussed at length. The verdict: nobody is still willing to stick their necks out and claim they know what is going to happen next.

As best illustrated, statisticians deal with events that repeat themselves. The housing market boom and bust of the last several years is so unprecedented that the experts are not able to rely on past experience to anticipate future behavior.

Home values are also difficult to predict because they are affected by so many interlinked factors. Even though it all starts with supply and demand, those elements are subject to fluctuations based on a myriad of things. Some people say jobs are what the housing market needs, but that’s only one small piece of the puzzle. Jobs won’t keep the millions of homes in the foreclosure pipeline from entering the market and over saturating supply.  Yet as values fall, the potential buyer pool grows, which can ramp up demand. In the end, analysts are finally throwing their hands up and claiming that what the future holds is anybody’s guess.

So what does this mean for buyers and sellers? First off, it is important to understand that each buyer and seller is a participant in the current market, and should base their decision making on such. What happened five years ago is irrelevant, and what will happen five years from now is impossible to know with any degree of certainty. If an opportunity to buy the right home for a manageable price presents itself, it is worth consideration so long as you plan to hold onto it for at least several years. While the value of that home may decline in the short term, the type of home and favorable purchase conditions may not be available down the road.

For sellers, a real look at present conditions is a good starting point. If the market value of the home would be a sales price that is acceptable, then selling is worth considering. If not, then alternatives should be examined.

People that bought homes at the top of the market and stuck with their purchases now see people living in their neighborhood for a fraction of the financial burden. This is a frustrating thing to deal with, to say the least. For today’s buyers who wish to avoid a similar fate, the good news is that homes can’t really fall that much further or they’ll be giving them away. That’s one prediction that this blogger is willing to make.

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