I believe the housing bubble will take at least 2-5 years to unwind. We are now in the first phase. This spring many single familiy homes will go on the market as many people (many in financial difficulty) will try to sell their homes as last year's prices. I expect that their listings will be the cause of an increase in the existing glut of homes available which will only drive prices down.
Many will choose to not sell at a loss but they will be emotionally and financially burdened by the expenses of maintaining a vacant house. This will cause numerous owners to attempt to derive some income from their houses by offering them for rent in the vain hope that the housing market will recover quickly enough for their house to be sold at a profit at the expiration of the 1 year lease. But I predict that their unpleasant experiences as landlords will only further demoralize them. Not only will they be unable to obtain rents that are sufficient to cover their present mortgage payments, real estate taxes and necessary insurance, they will also incur additional expenses related to the repair of ordinary wear and tear, unpaid rent, tenant caused damages, and evictions.
In the meantime many adjustable rate mortgages will reset this year and next year at higher rates. This is the developing crisis.
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