The effect of positive news on U.S. housing markets
2012 will be a year of recovery for U.S. housing markets.
This Hub caps my study as a Realtor, of the power of positive news generated propaganda, and its effect on the economy...
Last week for the second time in as many days, it was announced via the World Wide Web, that the prolonged U.S. housing slump would come to a long anticipated end in 2012.
Certainly welcomed news for all homeowners, as well as a general economy that depends on consumer driven consumption for 70% of its reported G.N.P.
Rather this economic projection proves to be true or not, is inconsequential as to the initial up- tick, that will ensue, as U.S. consumers anticipate a better general economy.
Good news drives the market.
Last year the word was circulated by the media and independent financial think tanks, that home ownership in the United States was no longer a good long term investment. That the family home, long viewed as the cornerstone of middle-class wealth, could no longer be considered a viable financial investment.
The reports read on to state that entry level, as well as down sizing senior citizens, were possibly better advised to rent in lieu of purchasing real property.
This unfounded financial sector produced propaganda, while embraced by those unable, or unwilling to purchase real property in a then... mostly uncertain housing market, effectively pushed the housing market bottom to new lows.
While the resulting consumer perseption of a ‘bad time to buy’ may of greatly benefited rental property owners, the all too often negative, as well as incessant drum beat drone of the housing sector outlook, pushed what remained of U.S. housing markets into the depths of short sale and foreclosure.
In many U.S. housing markets, sale price adjustments of -50% or more, was not unheard of...
Record foreclosure rates sweep the nation…
As reported by the National Association of Realtors: No fewer than 3.8 million American's lost their homes to forced foreclosure in 2010.
2011 would prove to be a bit better, as institutions struggled to find a balance between loan modification and foreclosure.
According to Realty Trac of Orange County Ca: Real estate housing markets showed a slight up-tick in the final quarter of 2011; as international investors the likes of Bank of America, Morgan Stanly Chase, and Well Fargo, were ordered to stand down by Federal Courts; in their push to remove toxic real estate assets from the books. This resulted in a stay of financial execution for hundreds of thousands of home owners facing the drop of the foreclosure hammer.
The judicially imposed embargo on Foreclosure, creating a false yet promising market up tick; resulted in a measurable increase in closed home sale transactions.
It would soon be reported by N.A.R, that no fewer than 50% of all home sales recorded in 2011, would be R.E.Os, or negotiated short sales. But in-fact, the reduction of distressed property inventory throughout the nation, would soon result in the best residential real estate closed sale numbers recorded in 24 months.
With 4.8 million closed residential real estate transactions recorded in 2011, it would now appear that the national residential real estate market is on the mend.
False hopes rise on the tide of the 2013 Presidential election.
Some believe that the real estate market, as well as the general economy will continue to up-tend, as the nation waits for the results of the Presidential election. After that? It’s anybody’s guess. And anybody? Isn't talking.
A fiscal cloud on the horizon?
There does remain the question of the dreaded shadow inventory, long reported by Realty Trac of Irvine California, to be hanging on the sleeve of the U.S. economic recovery.
The question remains for many a cautious consumer…. Is now the time to buy? Has the market hit bottom?
The great detractor…depreciates Real Property.
Historically, residential real estate has appreciated at the average rate of 3-4% per year.
This represents the average return on investment; disallowing for the highs and lows of an ever-changing market.
Grandma and grandpa’s house appreciated no less than 200% or so in 40 years, offsetting inflation. Beyond providing a foundation for family, the home was and remained a good, solid long-term investment. And then…2004 came along.
Although not in the news at the moment, its been reported by the National Association of Realtors and others, that no less than 25% of all real property in the U.S. has a lesser market value than the mortgage leveraged against the property. Much of this debasing is due to re-financing, thus consumers borrowing against the estimated equity stake in the property, as well as the impact of the real estate implosion of 2007-2009.
The implications here are limitless, as one takes into account the 24 million or so American’s willing and able to work, that are either under or unemployed.
The possibility of grand scale default is real.
The answer to the consumers cry for help, as provided by the federal government, comes in the form of the ‘making home affordable.’ Program.
To date, by most accounts a dismal failure.
Initially introduced by the George W. Bush administration, and carried forward by Obama and company, the program initially designed to help no fewer than 5-8 million homeowners, has helped to date fewer than 1 million.
Making Home Affordable is a mortgage modification program that is underwritten by the Fed. Those homeowners that qualify, secure re-financing at a lower interest rate in the hopes of reducing their monthly mortgage payment. Unfortunately, very few that apply, qualify for a permanent mortgage modification.
Temporary loan modifications do not work for those that must now choose between heat, food, and a mortgage payment.
Programs such as the Obama administrations ‘making home affordable,’ are very limited when applied to today’s problematic economic conditions. And while institutions offer their own limited loan mod programs, it becomes apparent that those in true need are not being reached; due to financial qualification barriers.
The estimated number of homes in the U.S. skirting foreclosure is mind boggling.
That number as estimated by Realty Trac? 9 million.
As reported by M.S.N.B.C, major lending institutions are now lowering the bar a bit as to mortgage loan qualifications. However, it was further noted that a credit score in the 700 range, as well as, a relatively low debt to income ratio is required to qualify for a prime mortgage rate. These numbers do not work for those impacted by job loss, underemployment, and escalating variable rate mortgages.
The Federal government has yet to land on a viable, sustainable solution as to dwindling home ownership in the U.S.
It is believed by most annalists that for economic conditions in the United States to return to somewhat of an historic norm… manufacturing as well as product distribution must be returned to U.S. shores.
With the creation of sustainable jobs, the demand for housing as well as other durable goods will once again return America to prosperity.
In closing. It is my opinion as a real estate professional, as well as a business political news commentator, that in order for there to be any measurable, sustainable change in the U.S., World economies, politics must be separated from the financial Sector. What I see in my day to day practice as a residential short sale specialist, is an institutional roadblock on the road to recovery, firmly implanted, as well as enabled, by 0 interest Federal Reserve funds, issued to World Banks; via T.A.R.P.
In a future article, I will share with you my recent discoveries as to the hidden benefit of the “stall” as practiced by institutions in the “short sale” process. And how the Banks, benefit from the paid forward income tax, of all that voluntarily pay them.