Is Relief on the Way for Residential Housing?
The chart above sums up nicely the effects of rising unemployment on the housing market. But, despite what the analysis suggests, is a relief really on the way?
Investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. We will not get a market capable of sustaining growth until the value of property decreases or income increases to the point where more buyers have more opportunities to purchase.
Let’s look at income …
This chart makes painfully clear that a real recovery in housing, if any, may be years away. As the 2002-2009 column makes obvious, payrolls do not exist to support a housing recovery.
This is the reason it makes sense to have all the programs to keep homeowners in their homes: not just because it’s better for banks (the bailout party of first resort), but because at current prices there just aren’t enough “qualified” buyers — even with hefty tax credits as incentives.
On a brighter note, homeownership rates have held fairly steady during the last year …
But on the next page, look at the ‘shadow inventory’ of homes ready to morph into home foreclosures in your neighborhood. In fact, according to a recent MBA survey, we can anticipate an “unprecedented wave of mortgage delinquencies and foreclosures” into 2011 …
Until excess inventories burn off, we can expect more price declines into next year — especially with unemployment at high levels. The new government mortgage assistance programs should help to ensure the fallout pattern is more of a wave than a spiral.
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