Tuesday, July 28, 2009

Stop The Housing Is Bottomed Talk

More reports out on the so called bottoming of housing.


Its nice to see foreclosures/short sales down to only 31%, but it that a healthy figure?
What about California? Florida? These markets are still under pressure.

There were definitely some decent positive things in this report, but does that mean that we are back online and off to the races? Does that mean that mortgage origination is going back to levels that would bring Supply/Demand back to equilibrium? Does the unemployment rate have anything to do with this?




Here are my reasons, even with the some what positive data out this morning why we are not there yet.

1- Home Prices. These are off 17% year over year. That is till a bad number. They are still about 15-20% above historic levels. As long as foreclosures/short sales are going off, this number will be pressured. Do not except to see positive trends for a long time.

2- Prices fall faster then they go up, sometimes they over shoot. Watch for this. The shadow inventory of unsold homes is staggering, when these homes come online....Its going to be nasty.

3-Unemployment is ugly and wages suck. Home buying guidelines will get more strict. Home prices exponentially grew faster then wages. Wages have dropped badly, can most even qualify for a mortgage?

4- No sign that Foreclosure activity has subsided. Cant get a true grasp because shadow inventory is hard to gauge.

5- Loan Modifications are just not working.

6- Too much inventory out there of homes. See my shadow inventory comments above. Too many flippers, specs, builders, and lenders own homes that they are underwater. They have not brought those on to the market. There is potentially millions of homes that are just sitting there.

7- 20% Down Payment is going to be the minimum going forward, you don't have that, go rent.

8- Bad Credit Score, sorry go rent.

9- Debt burdens are so large that people are in reduction mode instead of consumption mode. This is a ground breaking game changer of a reason that the economy has had it for the time being.

10- Credit creation just cant get back on line for what the economy needs. Problems at FNMA/FRE will make GNMA the mortgage originator standard. GNMA has much stricter standards.


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