You have probably heard little from the housing market recently. Didn’t you know the housing market had “hit bottom” according to many Wall Street analysts and was no longer a concern?
Not so fast with all the loose talk of bottoming and rebounding. The housing market is still discovering new lows exist. That’s the problem with government solutions to any problem. As soon as it talks about a problem, the problem–in their mind–is solved.
Just as with the continuing coverup of the real problems in Europe, the housing market problem in this country just can’t be swept under the rug and be considered over. It has a nasty way of sticking its head up at the most inopportune times. Here’s a scoop for you: The housing market won’t improve until the jobs market does. Government has no more ability to fix housing than it has at fixing unemployment rates. It can conceal the real numbers but it cannot fix the situation. Only Main Street can fix those problems and that will take years.
It was recently acknowledged from Fannie and Freddie that 2.8 million homeowners are 12 months or more behind on their mortgages. This is 19 quarters after the housing bubble first popped. But what was really disheartening in the numbers released by the two quasi-government agencies is the fact the percentage of homeowners who recover from this amount of lag time and can catch up is a fraction of a percent.
The bottom line is the country is looking squarely at another massive round of bank foreclosures, if the banks can survive the backlog of undigested mortgage-backed securities they still hold long enough to file the foreclosures. In the next four years the country is still facing the prospect of more than four million homes going through foreclosure.
Since the bubble popped in late 2007, 19% of all mortgages agreed to since then have been placed into foreclosure. That’s 9 million mortgages that have fallen more than 90 days behind even with the loan modification programs instituted by the government.
The higher standards put into place haven’t helped much either. Because of their delinquent problems, these potential home buyers are now barred from applying for home loans even if they have secured employment that would support the possibility of buying a new home. (Think of that for a moment, from 150 million households in the country, at least nine million are now barred from the opportunity to get into the market simply because the lousy job market put them on a list whereby they can’t qualify for a loan!)
This significant data means the housing market has not yet reached a bottom. It means those who do have homes are going to see those values shrink again in the years ahead as the short sales will continue as banks try to rid themselves of the problem paper on their books.
This is not a truly bad situation. It is merely the economy’s way of dealing with the overbuilding spree that the country went through from 2002-2007. That excess fat has to work its way through the system. America had become a couch potato for too long and needed to work off the extra weight.
But while it was lounging on the couch, government regulations sent many of the healthy-economy producing jobs overseas. Our faulty leadership hasn’t had the intelligence to reduce the weighty regulation to attract some of those jobs back to the States.
So it is a three-sided sword facing America. Without jobs for consumers to earn money, the economy cannot recover. Without an robust economy, businesses aren’t seeing enough demand to hire more people or increase production. In both cases the government steps in and hinders the recovery by tinkering with normal economic cycles.
Nobody needs an economist to tell them the country’s economy is stagnating again. Until people shuck the illusionary protective cocoon of government assistance programs, a stagnating economy is the best we can hope for.
“I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man.”–Thomas Jefferson