Fun little video on the Housing Market...

[9elf]

Finally someone makes a video about the future, with a breath of optimism.

Makes for a nice change.

[Porsche-O-Phile]

A little overly cutesy for my liking and WAY optimistic given the current conditions and realities facing the market. While there are some isolated nuggets of truth in that video, it's little more than a sales pitch.

The reality is that housing IS a lousy investment right now unless:

1. You have a lot of money in your pocket (liquid/cash) to afford 20% down on still WAY overpriced homes
2. You can actually find a lender that is still willing to write a mortgage using traditional guidelines
3. You think that you will still have a job in the next 12-24 months with a very deep recession looming
4. You expect to be in the particular home you're buying for at least 10 years (i.e. no "flipping", "upgrading" or "trading up")
5. You have seen substantial declines off the peaks in your particular market (this eliminates virtually all the coastal "bubbly" ones).

The one part of that video that made me throw up in my mouth a little was when the "teacher" was talking about how new housing was so wonderful - "new housing techniques", "priced very attractively", etc. Egads.

To repeat a couple of things I've said before:

1. "New" houses built during the bubble (with supposedly "new" construction techniques) are largely J-U-N-K. Unless you're talking about a custom-designed home in the $1M-and-up range where you can SEE the construction documents and get a good report off of a very comprehensive inspection, I wouldn't touch ANY home built between 2002-2008 with a 10-foot-pole. Some were built carefully using tight controls on material selections & methods (the very high end ones). Most were not. Most of these homes were slammed together by the cheapest and most opportunistic labor available at the time, often by fly-by-night developers looking to slap something together as cheaply as possible, pump it and get outta' Dodge before getting sued. Materials were in demand so a lot of substitutions were used, a lot of inspections were "glossed over" or "rubber stamped" (or worse still, paid off - yes it does happen), etc. Today's residential building materials are G-A-R-B-A-G-E compared to those used even 15 years ago. Lots of OSB, particle board, glues, plastics, etc. Crap that won't last very long without problems. Appliances? Please. Stuff today is largely all imported junk. I wouldn't expect today's stoves, dishwashers, washing machines or whatever to last 1/2 as long as ones made 20 years ago (lots of those still out there!)

About the only advantages that new homes have (or should) are (1) they should be better insulated and more energy efficient because of the newer energy code requirements and (2) the electrical systems/components will likely be sized appropriate to modern demand levels and with newer wiring. Even so, it might be a LOT cheaper to retrofit an older home with better insulation than to pay for some realtor sheister's "sales pitch price" on a newer one.

I suspect there will be a LOT of lawsuits regarding the construction quality of newer homes over the next few years. . . And that a lot of them will be torn down and rebuilt in the 15-25 year timetable. Not a very good life-cycle for a $400,000 (or more) "investment" is it? I'd be very, very wary of newer developments. Big red flag, far as I'm concerned.

2. We are nowhere near a bottom of the market. The "bottom" of prices is not going to occur until (by earliest credible estimates) around very late 2009/early 2010. Once this happens, you will likely not see a "bounce" but rather a prolonged period of price fluctuation in more-or-less the same range for another 10-15 years, before the atmosphere becomes "ripe" again for another bubble. If you're looking to make a quick, rapid return on real estate, put your money elsewhere. If you're looking to hold, live someplace and deal with (and pay for) all the problems/issues that arise for 10-15 years before seeing dollar #1 in return, then MAYBE it's a good play.