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The housing market is experiencing a transformation of generational proportions. If these five headlines tell us anything, it’s that housing will never “go back” to the old days. Are you prepared?

We’ve always said that housing can’t “go back” to the “good old days” because the “good old” people, markets and sentiment is forever behind us. Consumers, banks, government officials and even real estate brokers won’t forget the lessons of the Great Housing Bust for at least a generation. With the internet as memory bank, maybe much longer.

Yet it remains to be seen whether the lessons of the bust have been absorbed by the real estate industry. Especially, those brokers and agents who are still psychologically pining for things to change back.

All of which leads us to note five recent headlines we think indicate all bets are off for a return to yesteryear. Not necessarily in a bad way, but clearly no chance of returning to our Little Houses on the Prairie. So the sooner we understand the trend-lines, the better prepared we’ll be to succeed in the future.

From Bloomberg, June 2, 2011: U.S. Mortgage Proposal May Result in ‘Rental Entrapment’

  • Summary: Middle class families could find it harder to buy homes under a federal plan to require larger down payments in order to qualify for lower-cost mortgages.
  • Our Analysis: An unintended consequence of the 5% mortgage requirement for stakeholders under the flawed Dodd-Frank financial bill. Even if this proposal fails, banks themselves are likely to increase credit worthiness requirements for consumers for years, as a lesson from the irrational exuberance decade. This could shift “first time” buyers from their early 20s to late 20s and early 30s. Perhaps more.
  • Suggested Strategy: Develop a rental division for your company.

CNN Money, June 7, 2011: Walk away from your mortgage? Time to get ‘ruthless’

  • Summary: Strategic default is becoming more socially acceptable, especially as consumers feel less inhibition to “sticking it” to banks.
  • Our Analysis: This is a generational issue, causing Baby Boomers more angst than Gen X or Yers. If more consumers hit a wall while economic growth stagnates, younger ones will look for a “reset” button not unlike their video games. Especially if they lose any tax benefits of mortgages.
  • Suggested Strategy: Develop non-bank funding options for younger sub-prime borrowers (maybe lease-to-own). Mid-life defaulters may need to consider borrowing against their 401k, whole life insurance or stocks to buy again.

New York Times, May 22, 2011: As Lenders Hold Homes in Foreclosure, Sales Are Hurt

  • Summary: Even if released in a controlled fashion, bank-owned homes may cause a second wave of home price declines, foreclosures and defaults.
  • Our Analysis: Regardless of pace, the mere presence of such shadow inventory will signal buyers to seek uber-bargains, driving down demand and prices for years. Sellers with equity must beat the “days on market” in order to realize a gain.
  • Our Suggestion: A consistently rapid method of selling homes is needed. Auctioning could maximize price and create demand by manipulating time and competitiveness in consumers. Alternately, different brokerage compensation models – such as uncoupling fees from home price – will signal to sellers the true costs of improper pricing.

Wall Street Journal, June 1, 2011: When the Value of Housing Ruins the Home

  • Summary: The housing crash and prolonged recession have changed people’s living habits and outlook on life. Americans are saving more, spending less.
  • Our Analysis: This is a big shift in consumer sentiment. People’s view of housing has been irrevocably altered, even if most still desire to own their own home, as surveys say. A deep skepticism may settle into Gen X and Y about industry claims about housing as an “investment.”
  • Our Suggestion: Develop a sales approach based upon consumption decisions, not investment options. Avoid jingoism and deal directly with new consumer wariness. Have answers for consumers who won’t wait a decade to get their money back.

Forbes, June 2, 2011: The Groupon IPO: By the Numbers.

  • Summary: A company that makes electronic social-network driven coupons is filing for an IPO worth $25 billion dollars.
  • Our Analysis: LinkedIn at $4 billion; Facebook possibly $100 billion. Idle bank and investor capital is heading for a new tech bubble. That means money not heading back into mortgage lending or home building (at least not in America).
  • Our Suggestion: Follow the money, before the tech bubble rises, and make a case to investors about the long-term asset advantages of real estate. Look South, to Latin America, where consumers are used to making nearly all-cash deals, and have a strong appetite for housing in countries with strong property rights.