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By Henry Blodget~Business Insider
The new hallucination for most strapped McMansion owners is that they’ll “rent the house for a year and then sell when the market comes back.”
The happy theory here is that, yes, prices are temporarily depressed, but when the green shoots really take hold, we’ll go roaring right back to 2006 levels again.
Most real-estate agents will be eager to tell you that they agree with this theory. What they won’t be able to tell you, as Mark Hanson of the Field Check Group points out, is why.
Even after a 30% fall from the peak, house prices are still too high. Meanwhile, millions of homeowners are losing their jobs, consumers are still saddled with truckloads of debt, banks are still tightening credit, foreclosures and delinquencies are still soaring, mortgage-mods are a failure, there are still too many houses on the market, wages are declining, taxes are likely to go up, and the economy is likely to struggle for years.
In short, it’s likely that house prices will now crash below fair value and remain below it for years. So McMansion owners sniffing at current prices and planning to “wait until the market comes back” will likely be waiting a lot longer than they think.
Mark Hanson thinks the next segment of the real-estate market to crack will be the mid-to-high end (big houses in prime locations). Why? Because so far, those who forked over more than $1 million for their houses have resisted reality more successfully than the folks in lower-end housing brackets, where rampant foreclosures have driven prices down. But that, Mark says, is about to change.
