The stock market is going through tough times. Look at your battered 401k statement, if you dare, and you'll know how bad things are. Yesterday the DJIA barely hovered above the 7,000 mark. That's a 12-year low and some are still calling for more, a lot more, pain ahead. Short positions are now firmly in command.
The housing market is having its own reversal of fortunes to grapple with. Some markets in California, Nevada, and Florida are just dumping properties as fast as they can find reluctant buyers. Others, such as the northeast, are less severly stricken for now, but trending downward nevertheless. There are a few obvious reasons behind this condition:
- Banks are afraid. They are unable or unwilling to loan money to anyone but the cream of the crop of creditworthiness. That leaves many out of luck in securing a mortgage.
- People are afraid. Many with investment properties just want to cut their losses and sell, therefore flooding the market.
- High unemployment rates have caused many people to fall behind or stop making their mortgage payments causing many properties to be at or near foreclosure.
- Buyers are waiting for better bargains. As far as the home prices have fallen, many believe there's still plenty more froth to be erased.
- Money is scarce. People's investments have been decimated in the downturn, leaving little money or confidence to buy properties.
So what we have is a double-whammy of inflated supplies and shrinking demand and that's the basic pricing determinant for anything bought or sold.
Inherently, the housing market's response to economic conditions is slow. Unlike stocks, futures, or precious metals, it takes time to close the paperwork-heavy deals. But is it possible that the lagging housing market will also experience its own 12-year lows in the near future? If the stock and credit markets continue their deterioration, there's little else the housing market can do but to follow suit. And the bargain hunters keep waiting. Illogical and irrational as things may be, no segment of the market is completely insulated from the rest.