When will house prices go up?

When will house prices go up? That's the million dollar question that everybody is asking. The answer isn't too complicated. Let's look at this whole issue in simple terms without the Wall Street pundits predictions or banking jargons. Let's consider just two facts: The population of the US is increasing. Legal immigration is also increasing. These two together are enough to fundamentally change the demand-supply cycle. It's true, housing prices are going down. What's happening is that they are just correcting themselves away from the artificially inflated prices a few years back.

Consumption is the underlying backbone of the US economy. With the housing market near it's bottom, consumption has greatly decreased leading to a further dampening of the economy. Weather we are in a recession or not, basic consumption is never going to go away. By basic, I mean, food, water, shelter, transportation, school, etc. This basic consumption is what is going to drive the economy from the scratch. The economic baloon burst and we're going to have to blow a new baloon. Right after the burst, a huge amount of air gushes from the baloon. That's the stage we're in. We're seeing decrease in everything related to the economy. Once all the air is out, what will happen? Yup, you're right. We're gonna have to take a new baloon and blow it all over. When we start doing that.. when we start blowing our new economic baloon, the first two, three blows are going to impact the basic consumption. We will see a slight increase in food consumption, restaurant expenses, transportation expenses, etc. The moment people have money in their hands, restaurants are the first ones to experience the wealth. So, if you're watching the news and you see restaurants doing good business, you bet, things are changing for the better. That my friend, is the indication that house prices are going to go up. After basic consumption, people are going to get things they need around the house. Retail. That's next to show an increase. This is enough of a trigger in consumption to kickstart the economy back again. Pretty soon, you'll see kids moving out the house, rental income increasing and voila.. housing demand.

If you recollect the bust that happened since last year, the reverse of the above occurred. First housing, then mortage industry, financial industry, banking, now retail. We'll soon here mom and pop shops report losses and then the air is completely out. After that, we're on a smooth ride up.. and the cycle continues..