True Confessions of an Honest Realtor

We don’t see a rebound in the real estate market for at least five more years. You have high unemployment, a recession, wage pressure, and people not qualifying for loans despite record low interest rates and the FED stuffing the banks with money (banks won’t lend to you). At the same time you currently have high foreclosures, property prices declining, 23% of mortgages underwater, and people switching to renting instead of buying in the marketplace. This is not a problem to be solved in one year walking forward.

Let’s look at California demographics to see the really long term trend of the property market so we can get even better bearings. According to the US Census and CIA, by 2050 the population of California will have soared from 37 million to 50 million, and the US population will have grown from 300 million to 400 million.

Ok, what about housing? Taking demographics, immigration, incomes and so on into account, what does this mean?

This means tremendous demand for the low end of the housing market with rentals of $500-800 per month. Basically we are talking about small single unit or multi-family apartments. We will see cash short immigrants who can only rent. On top of that there will be demand for limited rental housing by 65 million Gen Xer’s and 85 million Millennials who, as our reporters have argued, are destined to see a lower standard of living than their parents. You graduate from college and the income just is not there to buy a home as in days of old.

As to the Baby Boomers, they’ll want to switch to apartments, too, as the kids grow up and they age, deciding to downsize. So we will be seeing in the future the downsizing needs of 80 million retiring Baby Boomers who don’t want to take care of large houses anymore (unless the kids are still living with them because the economy is that bad). That spells a shrinkage in housing demand as boomers move from an average 2,500 sq. ft. sized home down to a much smaller condo or apartment … and eventually a room in an assisted living facilities.

What does that cumulative shrinkage in demand for housing amount to? About 4 billion sq. ft. a year, which is about the size of San Francisco. That’s what the demographics have in store long term!

Short term, the housing bubble has popped and is continuing to unwind, something the government calls DEFLATION. It has to be so, and it will take years to unwind this mess with property prices declining further. Since experts now say you should plan on stocks returning no more than 5-6% per year for this decade, and since property prices are headed downwards rather than upwards, say hello to the new standard of living. Forget about a housing boom for the next 3-5 years as the recovery will take that long, if not longer.

All this is thanks to the greed of the banksters and Wall Streeters who, as we predicted, will try to make money off the next big thing: inflation (commodities), foreign ETFs, and currency plays.

What does an honest realtor have to say of all this mess? Listen in to this piece, reminiscent of Talk Radio:


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