Zombie Housing Market
Zombie Housing Market
On this broadcast of Capital Account, Lauren Lister interviews Barry Ritholtz, CEO of Fusion IQ on the housing market. Barry claims there are between 3 and 6 million homes in the foreclosure pipeline. Homes that are foreclosed but not yet on the housing market are referred to as shadow inventory. These homes sell at below market prices to quickly clear them from the banks books. By having so many homes selling at depressed levels, it prohibits the housing market from recovering and it maintains a zombie like state; not completely dead but certainly not alive and kicking.
Barry sees home prices falling another 5% to 10% without another recession. Here at Prepper Recon, we think another recession is all but baked in, so that would likely mean more job losses which leads to more foreclosures, which leads to an even more depressed housing market. On top of the 3 to 6 million homes in shadow inventory, there are approximately another 3 million homes who have not paid a mortgage payment in 12 months. Banks are delaying the foreclosure process and letting the defaulted borrowers stay in their homes rather than let them sit vacant. Banks refer to this practice as strategic non-foreclosure. This could go on for some time, but eventually these homes will also become part of the inventory. Think of them as a second wave of zombies that haven’t yet reanimated but you know it is coming.
It is a vicious cycle, without more jobs, we can’t buy homes and clear the inventory so the housing market can recover. Without a recovery in the housing market, we can’t create more jobs as it is the driver for a significant portion of consumer spending. Think of all the things we buy for a home, TVs, dishwashers, couches and curtains. None of these things get bought or need to be made if people don’t buy homes. As consumer spending is 70% of GDP, it is hard to grow out of the last recession without the sales of these home goods.
What does this mean for Preppers?
What it means to me is that I can keep saving for a Bug Out Base or rural retreat. If you haven’t read the Prepper Recon 7 Step Preparedness Plan, please do so. It will describe in detail what a bug out retreat is and what you should look for. I am more likely to get a good deal on a rural property in a year or two than now.
Does this mean you shouldn’t buy a home now? If you are in the position to buy a home now, meaning you have the credit and the down payment, you can probably buy and pay much less in mortgage payments than rent. As people are afraid to buy or unable to buy because of higher lending standards, rents have gone up while home prices fell. That money saved can be put away towards buying a rural retreat.
Be smart and do your research. You can set a search on Realtor.com for cities or zip codes where you would like to buy a home or a rural retreat. It will e-mail you every time a new listing comes up within your search parameters. Even if you know you won’t be ready to buy for another two years, start the search now to familiarize yourself with those markets. Remember, every housing market is local and will vary from area to area.
Happy prepping!
Interesting article and, indeed, we are not anywhere near out of the woods economically.
I would say we never left recession or even depression. Housing prices will fall more. Of you have cash on hand it’s a really good time to find and purchase the retreat!