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5 Reasons Not To Buy or Sell a House Right Now

By: Steve Johnson

1/25/2010 - 35 Comments

The current housing situation is a challenging environment for many reasons, primarily because of the government created housing bubble that is still busting.

The question is, is this the time to buy, sell or hold?

Sure the $8000 first-time tax credit or the $6500 any-time tax credit may look good, but there are also many reasons not to buy or sell right now.

Here are five reasons why I think the best position to take right now is to hold;

1) The housing market will continue to drop, as I have wrote about months ago – giving 5 reasons why the housing market is likely to have a second collapse .  The momentum of the market to push down the value of your home means that you will have to sell your home for less than a fair price.  At the same time, this is not a good time to buy a house because prices are still falling.  If you don’t own a house, consider renting and if you do own a home holding on to it is your best option.

2) Real estate would never be a good investment if it wasn’t for the boom-bust cycles that are created by government inflation.  Right now we are in the bust years and the government does not appear to be willing to allow a correction to take place.  Without a deep correction in the housing market, there will not be an opportunity for the government to create another housing bubble. Therefore, even if the housing market drops another 20 percent, it will not be enough to support another 100-200% boom like the one created in 2001-2005.  This means that Real Estate can not be considered an investment.  Therefore, don't buy a house thinking that it will be a good investment. Homes are very expensive to buy, maintain and operate.  Consider yourself rich if you can afford to buy a home and consider yourself very fortunate if you have one.

3) The housing market collapse has driven many of the home builders out of business.  The result of that drastic shift means that there are few new houses being built today and a large portion are getting older and older.  The supply of new homes has been cut off, yet the demand for homes is going to continue to grow with the population.  In a few years, supply and demand will once again meet up. When they do, there will be a shortage of newer homes so everyone shopping for a home will have to pay top dollar just to get a home that is younger than ten years old.  The generation that lost their home during the housing collapse, will most likely be looking for newer and smaller homes.  If you have a home that is newer and/or smaller, you will probably be able to get a very good price for it.  Therefore, if you have one of these homes, your best option is to hold on to it.

4) The coming wave of inflation is going to drive up the cost of building materials, making new home construction more expensive.  This has already happen and will continue.  This is causing home builders to reduce luxuries are nice things from new homes, just to get the price down to entice buyers.  The result is that your existing home which was built during the housing boom and already has some luxuries will be more attractive to future buyers.  This is another reason to hold on to your house right now.

5) The coming wave of taxes is also going to drive up the cost of building a new homes. Everything from State tax on materials to Income tax on labor is going to drive up the cost of new home construction.  This will drive up the prices of new homes and of course increase the value of existing homes, especially newer homes that compete with new homes.  For this reasons, if you have a home that is relatively new or updated, I think your best option is to hold onto it until the housing market collapse finishes its run.

These are my five reasons why I think the best thing to do right now with your home is to hold onto it and wait a few years, if you can, until the market turns your way.

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