.jpg)
The sky is filled with question marks
Tonight I have read several articles by some very authoritative sources. The thing about all these predictions is that they are all DIFFERENT! While they are all based on some facts, the overriding issue is the lack of transparency.
Banks will tell us exactly what they want us to believe. There is a plethora of news out there that throws around terms like "shadow inventory," strategic foreclosures, average price, median value, weighted average sales price.
Some of the statistics regarding home values includes prices at which REO (bank owned) properties sold, while others throw those numbers out. Some numbers include how many of what type of loans are going to re-set which will cause an avalanche of foreclosures, while some banks are not re-setting some of those loans immediately because they are delaying those foreclosures. Then there is the question of how reliable the numbers the banks are releasing really are? Are they accurately writing down values of loans on their books, or REO properties that have not yet been sold?
Just tonight I have read that home values will drop another 11%, and another forecast that the housing market will bottom out finally by March 2010 at the latest. Still another prediction recently is that housing values will drop another 25%, while another says this decline in values could go on for years.
As statistics are released, which ones are we to believe? Statistics, even if reported accurately, can be manipulated. If you add the following numbers, 4, 9, 17, 21, 22, the total is 73. The average of this group of numbers is 14.6. The median number is 17 (the number that is the middle number of the list). The weighted average is a number that can readily be manipulated by the statistician assigning a value to the numbers and then weighting each number according to the value assigned. Can you see now why we are all so confused?
The housing market will move in the direction that the majority of people believe it will move (within some limitations, of course). If the majority of home buyers believe the market has bottomed, and are qualified to buy, and DO buy, the market will stabilize sooner. However, if lenders continue to tighten requirements to get a loan, and credit remains tight, fewer people who want to buy will qualify, so housing values will continue to fall.
I honestly believe that everyone who is maing predictions believe that they are basing their forecasts on facts, and their predictions are of value. The bottom line is that there are too many variables to predict what and when the housing market will do. What we do know though, is that the economy will not stabilize until the housing market stabilizes. We seem to be caught in a catch 22.
There is certainly enough blame for this mess to go around. We can blame Alan Greenspan for dropping rates too quickly and too steeply; we can blame Congress for wanting to allow more people to own a home, thereby passing legislation to loosen credit; we can blame the banks and investment companies for offering ridiculously easy credit standards because the profit margins on those poor loans were huge.
There were enough hands in the pot to create this melt down, that we can conclude that this housing crash was inevitable. It seems to me that analysing what went wrong is good - we can't fix a problem until we understand it. But I don't think all these dire predictions that "the sky is falling" are going to produce any solutions. Perhaps all these prognosticators would be better served with reporting what we know and leaving the predictions alone.
I would love to hear what you think. I am not offering solutions here. I'm just tired of reporting what everyone says because the reports are too contradictory. I'm employed in the housing industry, so I should be better able to understand what's going on that the average person on the street. While I do understand mortgage laws, or at least I used to until they started changing the rules every other day.
And speaking of mortgage regulations changing every other day - will someone please tell the powers that be to leave things alone for a while? How can anyone predict who will even qualify to buy a house if the rules keep changing?
I don't have the solution. People call all the time and ask me if they should buy now or wait. I wish I could tell people what they should do; or at least I wish someone could. Does anyone have a solution?
Comments