The opening graph from the Associated Press story is pretty damn scary–and, what’s worse, possibly true.
“The recovery in the housing market is at risk of collapsing.”
Well, that pretty much says it all, doesn’t it? Though I would argue that we haven’t really had much in the way of a recover to begin with!
The evidence the A.P. gives for its conclusions: Home sales, down; prices not really going anywhere; and, of course, foreclosures still on the way up.
Says the A.P., “The trend could threaten the broader economy, economists warn.”
While it may be months before we can really test how accurate the A.P.’s headline, “Housing market’s recovery appears at risk,” will prove to be, the fact is it doesn’t take a brain surgeon (or a real estate agent?) to know that until the employment picture brightens, we are simply not going to see any meaningful improvement in the housing market.
We will see ups and downs, yes, but nothing that we’ll be able to label a true recovery until the job market takes off.
The problem is, it is not at all clear when or even if this will happen anytime soon—or even later?
In past recessions, manufacturing is what helped pep up the employment market. But nowadays, manufacturing jobs are dwindling in this country as they continue their migration elsewhere.
Service industry jobs, while certainly better than nothing, simply don’t provide enough income to light a fire under the real estate market.
Bank of America has announced it will actually lower the principal on some mortgages (mostly so-called Opt-Adjustable Rate Mortgages), but it is not expected to impact all that many people.
For the real estate market to really recover, as I have said for a long time, the law needs to be changed to allow bankruptcy judges to lower the principal when needed in order to restore the homeowner’s equity.
Leaving that to the bank to decide is a recipe for nothing!
At the end of this month, the Fed is expected, as promised, to stop buying up mortgage backed securities…some believe this will result in higher mortgage loan rates; others do not. We’ll soon know.
Also still to come, the end of the government one time special tax credit for the purchase of a new home. Another dark cloud to watch on the horizon?