I love getting a double dip of ice cream, but I’ve never been keen on getting a double dip recession. Unfortunately, it appears that my earlier post regarding “Our Housing Peril: The Next Recession” is coming true.
The MSM is finally starting to take notice. They are finally discussing the housing glut (for both new and older homes) and how that is affecting home values negatively. Experts in real estate and the economy are starting to go on record warning of the consequences of this ignored problem.
In Arizona, home prices fell 9.1% in Phoenix over the last year in spite of the incredibly low-interest rates. In fact, the only major urban area in the U.S. that saw an actual increase in home values was Washington, D.C. As I’ve said before, this is only the tip of the iceberg because there are still tons of houses that are in foreclosure or soon to be in foreclosure (my own house included). Experts in the article at bottom are forecasting that prices will fall another 5 to 10%. I will go a little further and predict, in some harder hit areas, Phoenix and Las Vegas for example, prices will fall as much as 15%. All it will take is the banks dumping more of these houses onto the market. That will be the final straw that pushes the economy back into recession.
To add some yummy sauce to our double dip, rental prices have actually started to increase. Why? Mainly because no one wants to buy a house right now and so the demand to get a rental home is extremely high. I was in the market to rent and every time a house went online that met my criteria, if I didn’t get to see it that same day and make an offer it was rented by the next business day. I was literally having to leave work at a moment’s notice to go see rental properties and make offers on my cell phone while driving back to work in order to even get considered. That’s a crazy pace for home rentals. The last time I saw such a fierce race to make an offer was during the height of the recent housing bubble, you know the one that started this entire mess. Perhaps the rise in rental prices will provide incentive to people to stay in their homes instead of walking away. So far, it hasn’t worked here in Phoenix. I was able to get a home that is 900 sq ft larger than my current home, with a full garage, in-ground pool and storage shed for $380 less per month than I am currently paying on my mortgage. That difference was enough to allow my husband to continue to stay at home with our 6 month old son and 7-year-old daughter.
So, yeah Amurrikans let’s focus on the deficit while we go back down into another recession. I want to be one of the first admittedly bitter people to say, “I told you so”.