The economic news seems dire, to say the least: home prices taking their steepest fall in May—ever! As in, ever!
The Standard & Poor’s /Case-Shiller index of 20 cities dropped 15.8 percent in May compared with last year, reports the Associated Press.
And, that is an average, of course.
Las Vegas, for example, had home prices drop 28.4 percent in May.
But the current and somewhat related energy crisis may help provide a sort of blueprint on how to lift ourselves out of this credit,mortgage,housing debacle.
Consumers strike back!
After week upon week of a steady drumbeat of seemingly perpetually rising oil and gas prices, oil has now actually dipped to a seven week low, down more than $2 a barrel! And gas prices at the pump are also moving in a downward direction.
What happened?
What happened is the American consumer got fed up and revolted.
According to the U.S. Transportation Department, drivers in the U.S. logged almost 7 billion fewer vehicle miles in May, the biggest drop ever recorded during the normally gas guzzling summer vacation season.
To be sure, there are other factors at play—a stronger dollar, for one thing, that are having an effect on the price of oil.
But, at the end of the day, it appears pretty simple–Americans are driving less and using less fuel and that is primarily what is responsible for the fall- off in the price of oil.
The mortgage/credit mess is admittedly a much tougher challenge. Having said that, what is happening with oil may be showing us the light at the end of the tunnel?
More and more foreclosed houses are now on the market–but fewer and fewer people can afford to buy them because credit is so damn tight. But there will come a point when banks (if any remain standing?) will have to lower their credit barriers or risk permanently losing potentially lucrative customers.
Can consumers, then, help turn this around for the good? Yes–we can!!
Related posts:
- How I can fix the mortgage mess
- Information and its Relevance: An Inside Look at the Current Housing Mess
- Why People Who Think Real Estate Mess Will Soon Improve Are Wrong
- Mortgage Crisis:The Knee Bone’s Connected To The Leg Bone
- Real Estate Headlines: Mortgage and Economic Stories Worth Reading for Friday, October 26
Article Author: Charles FeldmanCharles has written 179 articles for us.
Visit Charles's Website: http://www.thefeldmanblog.com
Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.
Joshua Dorkin
{ 5 comments… read them below or add one }
Good point Charles, the sharp decrease in demand is finally affecting oil prices rather than the myth that speculators are driving prices upward…as for banks the current back stop (i.e. $300 billion FHA insured loans) that congress has just put on their falling assets should loosen up lending.
No one knows how long it will take the banks to lower their credit barriers, and I wouldn’t think anytime soon. I am out in the East Bay of CA, and the number of short sales is almost equal to the number of foreclosures. So we aren’t at the bottom yet; and the banks are in store for even more hurt (if you can really call it that, considering they made a killing in years prior). In time, and when the economy picks up, it would seem to make sense that lending guidelines may change and become more favorable for home buyers. FHA has already done that, and well qualified buyers still don’t have a problem buying. Plus, most of those who purchased with the loose guidelines should never have bought in the first place.
I’m not sure speculation influence is a myth. Perhaps its influence has been exaggerated by some, but they do play a role…as does demand. Without speculation, the prices could not have possibly risen as quickly and as much as they did.
The bank issue must be like a red rag to a bull for many people (including me!). It’s ironic that banks ignored the allegedly stringent investment rules they lecture their clients on only to find they have a giant mess to sort out – and as a result, the market is paralyzed in many respects.
It is true that more and more foreclosed houses are now on the market. It is also true that fewer and fewer people can afford to buy them because credit is so damn tight these days.
In any case, I think one should consider carefully before taking any new loan.