Fast and loose housing market is history

The trillion-dollar question everyone keeps asking about the economy is: When will the housing market come back?

The answer should be apparent: It won’t.

Oh, home sales will slowly rebound and prices will at some point stop falling.

But the fast and loose housing market that made the industry billions and fueled the world financial market crash has gone the way of nickel pop and $1 gas.

The U.S. housing market that arrived in the early 2000s and caused the collapse is history. It won’t be making a quick return.

Along with the current financial turmoil, there’s going to be a fundamental shift about how people look at residential real estate.

Assumptions that home prices will always keep rising and that housing is the best investment on the planet will no longer be sacrosanct.

Both lenders and borrowers are getting a painful software update on how to compute the risks and rewards of homeownership.

For some folks, especially those in hard-hit markets such as Florida and Las Vegas, the change in perspective could be permanent. Even in Dallas, homebuyers are looking over their shoulders before signing a contract.

My old granny lived through the Great Depression. To the day she died, she didn’t trust the financial industry because of the people she knew who lost their savings when the banks failed.

Will some people feel the same way about home values?

Perhaps. Or at the very least, they’ll have real reason to worry if real estate values in their neighborhood start growing at leaps and bounds ahead of wages and overall inflation.

And if they question the wisdom of leveraging a house beyond all reason to pay for trips to the mall or vacations in Aruba, the economy will be better for it.

As for the real estate industry, it will have to make do with less.

Between 25 percent and 30 percent of recent peak housing demand is gone for good and won’t be coming back. Those were the purchases made by investors financed with the cash leveraged out of other properties and the sales to buyers who never should have qualified for homeownership.

The buyers left in the housing market will have to make true down payments and show real repayment ability before they can borrow.

That means fewer home sales, fewer home starts and less appreciation.

And, believe it or not, that’s a good thing. It makes a house a roof over your head instead of a get-rich-quick scheme.