Why aren't things improving?
Here are some headlines that will get your attention.
“Housing prices are down again and will continue to go down”; “US homes recovery distressingly slow”; “Mortgage meltdown, more pain to come”; or consider the New Home Sales Data, courtesy of the Census Bureau: New Home Sales fell on adjusted basis .6%. Unit sales were at 342,000 compared to 344,000 annualized in April. We all think spring is better for sales than winter ... but not this year.
And then, consider some of the expert commentary expressed by experts: “It is possible that we have seen the worst in the housing marketplace. There is likelihood that the housing correction may be nearing its end and bottoming out… Mortgage rates are hovering near historic lows and are expected to remain at these levels for the remainder of the year. The fiscal stimulus package promises to have a positive impact on consumer confidence and spending patterns. And the foreclosure mitigation programs are expected to slow the pace of foreclosures, exerting downward pressure on housing supply.
And then this: on the down side, the economy remains in a severe recession, shedding millions of jobs on a quarterly basis. Credit conditions also remain very tight, keeping households who want to purchase homes out of the purchase marketplace. And home values continue to fall as evidenced by the 16.8 percent drop in the median home price, year over year. On balance, it will take time for the housing sector to recover. It is possible that January’s home sales pace represents a cyclical bottom for today’s housing recession, but the pace of home sales are expected to remain weak for the remainder of this year.” (Real Estate Economy Watch Staff Comments on NAR data released June 23)
Do these comments appear to be a bit schizophrenic to you? Why aren’t we seeing more consistent positive economic results considering all of the government efforts to improve the real estate landscape? Mortgage interest rates continue to inch upward and appear to be resistant to the Fed’s attempts to manage the money supply . (Consider that the Fed has purchased almost 2 trillion dollars in Treasury Notes and the bond market behavior is even more problematic.) The President’s mortgage stabilization program, now called the “Obama 75 Billion Dollar Home Relief Plan” hasn’t made a dent in the number of foreclosures coming on line. (See the blog entry
more mortgage meltdown.) In fact, there is increasing concern that FHA capitalization may be in jeopardy by the end of the year. Ann Schnare with Real Estate Economy watch said the following in a June 29 Blog entry:
“The reemergence of FHA comes at a time when seemingly invincible institutions have been brought to their knees by mounting credit losses. Fannie Mae and Freddie Mac are now essentially wards of the State. Former industry giants such as Countrywide have been acquired or forced to close their doors. Yet on the surface, at least, FHA has so far managed to weather the storm. Is it really possible that this beleaguered, much maligned Federal agency will be the only one left standing after the dust has finally settled? Unfortunately, we believe that the answer is no.”Fundamentally, we aren’t seeing more improvement because the credit markets haven’t recovered. In fact, they continue to retrench and retract. We aren’t seeing more improvement because the equity markets are concerned simultaneously about real estate deflation and monetary inflation. We aren’t seeing more improvement because real estate inventories are not coming down, they are increasing. And finally, we aren’t seeing more improvement because unemployment is rising, not declining. Fundamentally, people and institutions know that there is no easy way out and they are still walking in a maze looking for the exit sign.
However, in the midst of great destruction, there is always great opportunity - for another article.
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Why aren't things improving?
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