12/17/12, "Obama’s four-year housing failure Net Right Daily, Bill Wilson
"If housing tends to lead economic recoveries, then we’re in
trouble. This marks the worst post-recession home buying market since
the Great Depression. Nobel laureate Professor Vernon L. Smith, who delivered the keynote address at the Cato Institute’s 30th Annual Monetary Conference on Nov. 15,
noted how housing leads both recession and recoveries.
“In 11 of the past 14 recessions, you’re having a decline in housing
leading that recession. And all recoveries with the exception of — if
you want to call this a recovery we’re in — with the exception of this
recovery, housing has always come back after a recession,” said Smith.
He’s right. New home sales are still about 66 percent below what they
were in 2003, when prices were roughly the same as they are today.
That accounts for 368,000 new home sales annualized in Oct., compared with more than 1.1 million in Sept. 2003. The prior month’s sales were revised down by 20,000, too.
In addition, some 10.4 million homeowners still owe $680 billion more on their mortgages than their homes are worth as home values are still 31 percent below their April 2006 highs. That is 22.3 percent of residential homes with mortgages upside down, reports CoreLogic.
Locally, in Nevada 59 percent of homes with mortgages are underwater,
43 percent in Florida, 36 percent in Georgia, and 33 percent in
Michigan. Those four states alone account for 34.1 percent of all
negative equity mortgages nationwide.
Overall, negative equity keeps about one-fifth of homes nationwide —
and nearly half in troubled regions — effectively off the market for
those homeowners who simply cannot afford to sell. This drives sales
downward, as the amount of willing sellers collapses.
But demand is also a problem, too.
With low savings and relatively higher unemployment, the amount of
buyers who can take advantage of relatively low prices and historically
low interest rates is not accelerating. The unemployment rates in the
aforementioned states are
11.5 percent in Nevada,
8.5 percent in
8.7 percent in Georgia, and
9.1 percent in Michigan.
In short, it appears likely the housing market will not improve
substantially until the jobs market gets better first, particularly in
the areas where the housing downturn hit the hardest. New buyers would
then be able to get into the surplus housing stock of foreclosed homes.
Once that happens, prices would eventually begin to improve, too.
The high unemployment rate alone explains why all of the “stimulus”
and bailouts in the financial sector have been to so little effect in
improving the market so far....
Obama for his part has been trying to slow down the very foreclosure
process that might be the solution. In the meantime, millions of
Americans still cannot find full-time work in this economy, and in Nov.,
another half million Americans stopped looking.
On the bright side for Obama, while maybe not for the rest of the
country, at least his mortgage is paid for the next four years. Of
course, the check is drawn in red ink."