Explaining The Housing Market Doldrums

Yesterday I heard a segment of NPR’s Talk of the Nation that discussed the housing market in America.  The host and his guests discussed how housing prices may have bottomed out, how buying a home is cheaper than renting in some areas, how buying a home and making those monthly mortgage payments is a good step toward financial discipline and accumulation of personal wealth, and other factors that weigh in favor of buying a house.  They seemed mystified about why American consumers aren’t flooding into realtor offices to snap up homes at bargain basement prices.

I don’t think there should be much mystery about why the housing market is in the doldrums, however.  In my view, it is almost completely attributable to a lack of confidence and optimism about the future.  Many people in America have been deeply rattled by the economic turmoil of the past few years.  They’ve seen friends thrown out of work and bright young college graduates unable to find a job.  They’ve seen the value of their 401(k) portfolio on a roller-coaster ride and, if they are an existing homeowner, they’ve seen the value of their home fall with the bursting of the housing bubble.  What’s more, over the past few years they’ve heard assurances from economists and politicians about an economic recovery and confident predictions of dropping unemployment rates and robust economic growth, and those bullish assurances and predictions have consistently proven to be unfounded.

The old saying “once bitten, twice shy” applies here.  Americans don’t want to bet right now on economic growth; they understand that we teetering on the brink of dropping into another recessionary period.  They just want to hang on to their jobs, hunker down, and wait until things improve in the real world and not just in some academic’s econometric models.  Signing your name on a 30-year mortgage is a really big step.  Why would you want to do it if you don’t have any confidence that you will keep your job and that better economic days lie ahead?

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Closing The Loop

New Albany is a good place to live in that is getting better all the time.  However, it does have one drawback — it’s new, and that means there is still a lot of vacant land on which to create subdivisions, plot out new lots, and build new houses.

This fact poses issues for the owners of existing homes who want to sell their properties.  In the current bad economy, the market for real estate is soft everywhere.  When new homes are constantly coming on line, it just makes the market for selling existing homes that much more challenging.  In that respect, New Albany is different from Upper Arlington and Bexley, both of which are established Columbus suburbs where every inch of available ground has long since been the location of a house.  In those communities, if you want to build a new home, you have to buy an existing home and tear it down to do so.

So, for current New Albany homeowners, the familiar sight of yellow construction equipment, pallets of bricks, and building supplies is a double-edged sword.  We know that adding more new homes is going to affect the market for our homes, but we also know that the ultimate goal has to be to build New Albany out so that the market becomes more fixed.  If you’re like us, and don’t have a house on the market right now, you want developers to close the loop and get the new builds done before you put that “For Sale” sign in your yard.