What does residential real estate do next?

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I think we are all tired of hearing about residential real estate market and the drop in value of our homes. As many us feel no turnaround is in sight, what do we do next?

Nothing and focus on the future. Why?

Unless you are in a position where you must sell your home, you are only sitting on a paper loss. If you are planning on being in your home for many years to come, you will most likely return to profitability on your home over time.

As bad the real estate market seems, if you do not yet own a home, you should jump in soon. Homes are at an unbelievable value right now with the combination of historically low mortgage rates and the current value of homes. Anyone could look like a Donald Trump three years from now in this market (well, maybe not the hair part).

For those of us (like myself) who have lost significant equity in our homes, the end is closer than you think. Mortgages going 90 days late (or more) have dramatically slowed down. Thus, the future supply of the foreclosure pipeline is also going to slow down.

We all hear about the shadow inventory. These are homes that people have defaulted on their mortgage, but banks have yet to put those homes on the market or completed the foreclosure process. Banks will begin pushing this inventory into the market starting toward the end of this year and the beginning of next. It will take 6-9 months to get the remaining inventory sold. In theory, some markets may wind up with a housing shortage toward the end of 2012.

Once the shadow inventory is gone, combined with the reduced amount of new homes being built, we will have created the perfect storm for an escalation in home values. The suppression in home values won’t last forever. So look to the future, it will be bright and the housing nightmare will be gone.

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