ARE YOU PREPARED FOR THE HOUSING SHORTAGE?

Ready or not, we will be facing a housing shortage in very short order, many experts indicate that it will hit as early as 2011.

It seems ludicrous to think that there will not be enough homes to meet demand after our experience of the past few years. The housing market cycle has fluctuated wildly in recent years with prices skyrocketing year after year and then plummeting. Of course, any pretence of equilibrium in the market has long since disappeared. Banks remain reluctant to approve loans to all but the most credit worthy and new home construction has become a phenomenon of the past.

Our population is still growing and families still need a place to live. The old forces of supply and demand continue in play. With too little supply, the demand will influence both rental properties and home sales. The prices that we have seen fall so far will start to rebound and rental rates will increase steadily.

The major question is how quickly will the financial institutions react? Will they loosen the reigns and allow more buyers to qualify for financing or will they remain conservative? We are betting that investors will continue to demand higher returns and cause a loosening of credit, although not to the same extent as happened in recent years.

Landlords will reap the rewards from higher rental demands. Perhaps they will make up for some of their losses from the past few years. Homeowners will benefit from the rebound in property values. Although we do not see home prices skyrocketing as they did in 2004 and 2005, they will rebound. Interest rates will also increase. They cannot stay at present low levels very much longer and will rise as the economy improves.

Potential homebuyers may find these conditions are not in their favor. Those in a position to purchase a home would be well advised to do so NOW, while market conditions are working to their advantage. Most of us operate a little behind the curve and miss the best deals because we keep waiting for validation of the present market conditions. Would it not be better to act BEFORE everyone else does and reap the benefits of foresight?

Check out the latest Forbes article on this subject: http://realestate.msn.com/article.aspx?cp-documentid=23505825

Or Money Magazine: http://money.cnn.com/2010/06/15/real_estate/new_housing_bubble/index.htm