Quote:
Originally Posted by Velvet
I don’t see why house prices would decrease in TV because of the virus. The same number of people still need to live somewhere. Most of the owners are retired and not employed in the first place. We did not lose any significant number of people to death. The place is one of the safest from crime and virus in the country. In a few months all the fun will be back our amenities can buy. A lot of people will still need to retire from all over. People are chomping at the bit to rent or own here. So why would the home prices in TV decrease?
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There are always two sides to every economic valuation, supply and demand. You are only looking at the demand side of the equation. There is also the supply side
Current Demand issues:
The simplifying assumption of "Most of the owners are retired and not employed in the first place." may not quite hold up as thought. Most people relocating are coming from an existing job. Potential retirees laid off unexpectedly, and have to draw down their nest egg/potential down payment, which will reduce the potential demand on the size of the house. Current house prices are falling, albeit slowly at the moment, so people wanting a certain price on their existing home to move will have to wait longer. Current housing sales are slower, so if the potential TV retiree can't sell their house as quickly as anticipated, sales will slow in TV, causing the developer cash flow issues.
Current Supply / Developer issues:
The developer has had quite a few custom homes purchasers back out of the contractor, forfeiting their deposit. There are houses owned by the developer down $75K from the initial sale price. The developer is paying interest or forgoing future home development on the unsold, high end house just sitting there.
Finally, some people are conflating recent past housing sales trends with future sales trends. No doubt the housing sales / pricing / demand in the future from the virus will be affected by the economic recovery, or lack of one. We are effectively only two months into the lockdown created recession, and the economic effects are really yet to be understood. Most recent housing sales trend reports haven't been effected by the virus due to the purchase to loan cycle being one to two months and primarily centered around employment changes. Some banks are now pulling out of the housing loan markets due to the uncertainty of the fiscal support and the uncertainty of the recession.
So although the last housing cycle bust was 10 years ago, this event is completely outside the banking industry failures and self inflicted collapse, so the recovery will be completely different than 2008-2009, as will the depth of the collapse, if there is one.
Keep an open mind and adapt to the changing economics, which may be hard to do outside the industry.
sportsguy's opinion