Conservative
Type 40
4 Reasons Why the Housing Market Still Hasn't Recovered - Reason.com
And the part that really agrees with what I am saying...
It is somewhat naïve to conclude from this that housing is back. (Unless you live in the greater Washington D.C. area where construction is booming like its 2005.) Just this week the Federal Housing Finance Agency reported to congress that Fannie Mae and Freddie Mac are still in critical condition because of poor performance and the legacy of their bad loans in the last decade.
Part of the challenge in this debate is how a recovery is defined. I argue that it will be when foreclosures have been worked out of the system, negative equity is cleared away, and prices have stabilized. By that standard, we still do not have a housing recovery.
Argument #1: With record low interest rates everyone will be looking to get back into homeownership.
There have actually been record low rates for several years now, but the cheapness of a mortgage is only one factor in the home-buying process. Consider while mortgage applications are up with super low rates, nearly four out of five of those have been for refinancing, not home purchases. That is because household debt is still a massive deadweight on the capacity of families to buy a new home. At the same time, household wealth has been crushed over the past few years. Refinancing is not recovery, and low rates are not a sign of a positive future.
Argument #2: Housing starts and sales of new and existing homes all went up in April and May.
The shadow inventory still has millions of homes to clear away, and this means that prices will likely continue falling for the next several years, even if at a slow rate. Falling prices and continued foreclosure rates dont qualify as a recovery, no matter how many homes people are buying relative to previous months.
Argument #3: The historically positive correlation between the Wells Fargo Housing Market Index (HMI) and Case-Shiller Housing Price Index suggests we are heading into recovery.
Demand for new homes is not the benchmark for recovery, so reaching a bottom on the HMI is also not the bottom of the housing market.
Argument #4: Homebuilder profits are up, leading to improved builder sentiment
Construction companies have been voicing their negative sentiment with their wallets and shedding jobs about 50,000 since January. You would think will all that positive sentiment that builders would be gearing up for their great summer. But in fact, according to the Bureau of Labor Statistics, nearly 30,000 of those construction jobs dropped this year were lost in May, right when the housing market was supposedly taking off again.
And the part that really agrees with what I am saying...
Even if you put the good news into this calculation, the result is still nothing close to a recovery. At best there is light at the end of the tunnel. That light is several years away, though. It is absurd to think that housing prices have reached their bottom. It is equally absurd to think that foreclosures and underwater debt will not create massive headaches for the years to come. Dont be deluded by a few positive stories. Stay buckled in, because destination recovery is still a ways down the road.