I received some feedback and questions about one of our July blog entries regarding signs of a recovery in the housing market. The entry was entitled: Housing Market is Showing Signs of Recovery. Some of my clients wanted to know if this meant they will stop “losing money” and that their property prices would go back to what they were.
There has been a lot of talk about a housing recovery. We, the Brooks and Heinze Team, have also reported on promising developments such as more sales in recent months, and multiple offers in some neighborhoods and other promising news.
After a long time of little or no movement in the market, this development certainly was worthwhile reporting and very encouraging. Some of the ‘flurry’ can be attributed to lower interest rates, greater affordability and the first time homebuyer tax credit.
However, for a sound recovery to take place which will stabilize prices and offer some growth in the future, the economy has to improve and good jobs need to be available. Real estate agents and economists know that the housing market cannot truly improve or recover unless the economy and with it the job market improve.
According to the Bureau of Labor Statistics, unemployment rates were higher in August than a year earlier in all 372 metropolitan areas, the U.S. Bureau of Labor Statistics reported today. Sixteen areas recorded jobless rates of at least 15.0 percent, while 9 areas registered rates below 5.0 percent. The national unemployment rate in August was 9.6 percent, not seasonally adjusted, up from 6.1 percent a year earlier. Among the 369 metropolitan areas for which nonfarm payroll employment data were available, 356 areas reported over-the-year decreases in payroll employment, 11 reported increases, and 2 had no change.
The economic downtown was created to a great extent by an insane housing bubble made possible by the availability of easy and cheap money or “bad loans”. People who should not have qualified for a loan were able to buy homes and other people who should have been able to buy a home were put into higher loans than they should have qualified for or were made loans that were structured in a way that made them unaffordable.
To make matters worse now, the number of good loans that are now going into default are surging as a result of the economy, not just poor loan underwriting. So, although the housing crisis may have help in the economic downturn, at this point the economic downturn is putting additional pressure back on the housing market due to job losses, and losses in property values; so even the once “good” loans are now going “bad”.
This brings me back to why I wrote this article. I want to make sure that our clients understand that there is some good news about the housing market but I also want them to understand that only as the economy at large improves and more good jobs are created, will the market and prices stabilize; and then I will be able to report that there has been a true recovery of the housing market.
Kerstin G. Brooks
Brooks & Heinze Real Estate Team