The fall of the housing market. A contrarian view to the rising housing market
Over the last few weeks, my posts have reflected my bullish view on the Orange County housing, at least for the next 2 years, due to a improving economy and a shortage of inventory for both investors and home buyers alike. However, like all investors, I am obliged to check out the contrarian view to manage the risks and the potential downsides to my company’s residential investments. Keep in mind though that these contrarian views are in relation to an overall US market and markets close to the coast, in locations with high demand due to job growth, or limited land to expand may not share the same problems faced or to the same extent.
From what I’ve gathered from my readings over the last week, contrarians view this current surge in demand and prices as a bear rally in the housing market for the following reason
1. Mortgages are now funded by the federal government rather than private banks or investment firms. Eventually, the government will be forced to tighten liquidity in the market, in turn raising interests rates, and pushing prices down. Here is a story on rising interests rates putting a damper on housing prices. Check out this link.
2. There are more new homes being built than there is demand for.
3. There are still states, known as judicial foreclosure states, which still have a large backlog of foreclosures to process, which would later come on the market. With a large influx of supply, this may stagnate or cause prices to fall.
4. Hedge funds that have been investing in real estate may begin to unload their inventory en masse.
5. Foreign influx of capital purchasing real estate leading to price increases, is over stated and what there was is only temporary given the strengthening US dollar. Read more here.
To see in depth articles on the contrarian view towards the current housing market rally, check out the link here
