Housing Recovery, Short Sales & The Economy

The Aftermath: Prices Can’t Bounce Back

In the wake of the recession many home owners hoped to be able to sell their homes as prices increased and for some this has in fact happened. However, if prices did go back to 2008 levels why would those prices be sustainable in 2014 if they weren’t sustainable in 2008? I mean to say: have wages increased 25% in 5 years? No, then why should we believe that houses can increase that amount? And, more importantly, who would be able to buy them?

As we move into the fourth month of the year 2014 some have asked if the short sale specialist is still relevant in the Portland Housing Market. To answer this question we’re going to borrow a quote from former US President Bill Clinton and say: “It’s the economy, stupid.” (we were tempted to say “I didn’t inhale” but unfortunately we couldn’t find a way for it to fit the article). So, the economy has recovered, right? In some ways yes but it’s also worth noting that our new, “recovered” economy is much smaller than it was before.

Household Spending Money Decreases Without Cash-Out Refinances

During the housing boom, millions of American Households increased their spending money by using cash from home refinances to pay off student debt, credit cards, car loans and even pay for family vacations etc. So, fast-forward to 2014 and home owners are much less willing or unable to refinance. The result is that our current economy is smaller because the average household has less money to spend. Less spent money means fewer new jobs and companies can’t give out raises and so goes the cycle. For awhile, this cycle of refinancing gave the illusion of wealth but eventually everything comes to an end. In this case, the end came when working and middle class families could no longer afford to buy a home. Here is a good place to point out that the true definition of a home’s value is what someone is willing and able to pay; and so fell the house of cards.

By Richard Lockwood
Real Estate Broker
Licensed in the State of Oregon