Several stars need to come into alignment for a full blown housing recovery. First there must be a meaningful jobs recovery to supply the market with demand. Second the inventory of foreclosed homes, and short sale properties needs to be absorbed to stabilize prices. Finally there needs to be a return to reasonable, yet prudent lending standards to make home loans available to worthy home buyers.
First quarter housing numbers are due out in a couple of weeks. From my perch in central Illinois it is difficult to tell the national trends, however here’s my stab at it; closed home sales up modestly, sales pending up more than ‘expected’, and home prices stable to down slightly depending upon region.
Looking at our first star that needs aligned, jobs. There is some improvement, weekly initial claims for unemployment insurance are running below 375,000 to the lowest levels since 2007. That typically translates into robust job creation. But not this year when the March jobs report indicated only 120,000 net jobs were created.
We all know the government’s perverted methodology to calculate the unemployment rate is intentionally misleading to help the politicians of both parties. One thing is for certain, if we would begin a legitimate recovery process the nearly 13 million out of work or the 12 million underemployed would love the opportunity to fill those jobs. In other words there’s no shortage of labor, maybe qualified labor, but the sheer numbers are available.
The bottom line on jobs is that we are making progress. At the current rate of job creation, calculating population growth, and new entrants into the jobs market we should reach a 6% rate by 2050. So hang in there home sellers, help is coming.
The second star; foreclosures and short sales. Realty Trac is reporting the fewest foreclosures in Q1, 2012 since 2007. Don’t break out the party hats. The robo-signing law suit settlement which froze the majority of foreclosures for a year created a two year backlog. By freezing the homes in the process of foreclosure from 2010 in the 2011 pipeline, those that normally would have been added to the pipeline had nowhere to go.
Reuters reports several sources as predicting there will be more foreclosed homes in 2012 than in the record year of 2010. That’s good news, holding these properties off the market only delays housing from hitting bottom.
The third star in the alignment to recovery, home loans. As is the historical practice of government creating a problem, as government did with the Community Reinvestment Act, the genesis for the housing meltdown by making home loans available for anyone not yet declared legally dead, the Dodd Frank Law is a grotesque overreaction that throws the baby out with the bath water.
Speaking with a local lender they report that it now takes the same man hours to process four mortgage applications as they could process ten before Dodd Frank went live on September 1, 2011, appraisals are taking longer with more restrictive appraising criteria, and a large number of people are being denied loans who should be approved.
Better yet this lender can’t remember a day since the Dodd Frank Law went into effect that a new compliance rule didn’t come zipping in on e-mail or fax. This can be attested to by Realtors who are notified of new demands upon buyers and sellers from underwriters up to and including the day of closing, before a clearance to close is granted.
It’s simply too early to tell how many home sales Dodd Frank is merely delaying while everyone’s furniture is sitting on a moving van, or how many are being killed over some brilliant bureaucrat’s brain cramp in DC thinking they are protecting the consumer, the lender, or the financial system.
So there you have it. Jobs are improving at a glacial pace where half out of work no longer being counted will be pushing up daisy’s before they get a job. A record number of foreclosures are about to hit the US housing market, and the government’s way to fix what they broke is to make lenders and borrowers stand on their head gargling water while clearly chanting, ‘yes we can’ to get a home loan.
That’s the good news regarding the housing market.
The bad news for housing? Barack Obama could get reelected.
The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International