Tuesday, March 6, 2012

An Inference from some Broad Figures

Realtytrac.com is a handy website, take a look when you get a minute. Reviewing the foreclosure trends: you will notice that 1 in every 624 homes, nationally, are in some category of foreclosure. Looking exclusively at California, that figure becomes 1 in every 265 homes (0.4%); and San Francisco, thankfully, is only 1 in every 1,115. We can broadly conclude that there are demographic and industry trends specific to regions, the driving mechanism of housing prices and foreclosure rates.

This is an in-conclusive conclusion, sure, but maybe we can take a step further with this empirical speculation. Foreclosures, by definition, put a downward pressure on prices because supply is greater than demand. The government has involved itself in a number of fashions to increase demand, countering the supply-side pressure:
1.      First-time home buyers credit
2.      Lowering mortgage rates
3.      Putting pressure on Freddie / Fannie to keep as many homes as possible under the protection umbrella, etc.

My mind wanders towards demographics:
·         What will happen as more seniors choose to reverse-mortgage their homes, opting not to bequeath their estates to their children of the next generation? (check out the AARP website)
·         What will happen if credit standards and minimum down payment requirements for housing become more conservative from here?
·         What will happen as industry landscapes change?
·         What will happen when people vote in the most powerful way they can: with their feet?

There are many “risks” that can and probably will put pressure on housing prices from here. Hard to draw conclusions when dealing with wide-ranging, uncategorized figures.  How we denominate urban stats needs to be understood from the sub-urban.

Still. The questions are relevant.