I have written about the imbalance of supply and demand in the housing market for several months.
Today, the supply of homes on the market far outweighs the demand. As a result, home prices must come down.
They must. And they have.
Prices will continue to drop as long as there are more homes to sell than buyers for those homes.
The government is making a great effort to encourage new demand for homes. They are currently offering tax incentives for first time home buyers, and those incentives will probably grow.
These efforts will help, but only slightly.
Imagine, for a moment, that you are the housing market. You are lying in a bathtub, and the water is almost over your head.
That is today's housing market. It is drowning in homes for sale.
The government is doing all they can to lift you above the rising water. Why not? Surely, that will prevent you from drowning.
But lifting you is difficult. You are very heavy and the water is high.
The problem is not that you are in the tub. Baths are very nice, afterall.
The problem isn't even that the water is too high. You are still above water, so you will not drown at current levels.
The problem is that the water is still running.
The tap has not been turned off!
I believe in free markets and capitalism. I am concerned with the government's growing involvement in the markets.
Capitalism has a way of solving economic problems. Those ways are not always pleasant. Sometimes they are very painful.
But they are very efficient.
Home builders are still out there building new homes every day. In this market, I find that unbelievable.
Why are they still building homes? Don't these companies know that they can't sell them at 2005 prices?
They are still building homes because they are home builders. That is what they do.
They are lobbying the government (along with the Realtors) to encourage demand for homes.
Please, government, stay out.
Capitalism will solve this supply/demand imbalance.
Do we need Ryland Homes, Toll Brothers, Town and Country, and D.R. Horton building 800,000 new homes this year?
In today's market? No way.
Capitalism will solve this problem.
These companies will go away soon. Very soon.
Supply and demand will come back together.
To find your next home, go to my Naperville real estate website anytime.