The housing crisis in 2010
That is the hope of the real estate market. It is the same hope of the Obama Administration and numerous economists. Because the financial industry and the American economy are directly tied to the relative improvement of the housing markets.
Reality though is far from the hopes and pleas many are making. The reality is that home sales dropped 16% in November (according to the National Association of Realtors), a massive 14% more than expected. Add to this fact the news that mortgage foreclosures and defaults are at the highest levels in 30 years. Add to that the failed $75 billion Making Home Affordable government program that can only be said to have slowed the problem instead of fixing it as was proposed.
According to Moody’s some 2 million homes were lost to foreclosure and delinquencies in 2009. Some 2.4 million are expected in 2010. This has some time ago become more than a issue of just sub-prime mortgages.
If estimates are correct, then the unemployment rate will hold or increase through most of 2010. That will add pressure to the housing market. Which in turn will add to the problems of the banking industry. The only factor making the outlook seem palatable is the fact that Government intervention is spurring purchases. The $8,000 home credit is seen as the only factor preventing another series of downturns in real estate – something that cannot go on forever.
The reality, that is not being mentioned in the major media, is that the suffering must get worse to get better. In fact, since the election of President Obama the major media has all but forgotten the housing crisis. Not that anything has improved, just that they don’t speak on it any longer, giving the impression of improvement. Which aids no one.
If these estimates are correct in assuming that once Government intervention ends, in the spring, up to 10% drops will occur and if we assume that the unemployment rate (the real unemployment and not those on Government coffers) only increases another 3% this year, things will be very harsh. This likely can trigger another round of banking woes, taking the stock market with it.
The fact is that the impending doom proclaimed by President Obama in January 2009 has not been averted. It has been delayed. It has been slowed with the use of tens of billions of taxpayer dollars, a system that cannot go on indefinitely. And the question becomes will the Government step in again, with even more funds that do not exist, to prevent bad business practices from causing more institutions from failing?
Given that 2010 is an election year, that Democrats wish to ensure they maintain their power-base in Congress, that the economy and homes are the leading concerns of constituents across the nation, something will be done to look effective. But unlike the philosophy of Billy Crystal’s Fernando, looking good is not better than feeling good.
The concern is this, will the Government allow the nation to feel the pain needed to correct this housing crisis, a crisis they have effectively ignored for a year, or will it paint the equivalent of rainbows that will enable a political advantage to sustain until the day after elections?
February 3rd, 2010 at 4:34 pm
[...] has been addressed here before, the mortgage housing crisis is anything but over. In fact it is worse than ever. Here are just a [...]