There are lots of talking parrots on TV talking about how housing has bottomed. How Case Shiller is telling you that. How the continued decrease in MLS listings is a positive. How inventory has decreased. Blah Blah Blah.
Don't believe any of them. This is the same type of behavior that the bank executives tried to distort on the rest of us leading to the credit crisis. You remember the parrots from Lehman and Bear? How about the parrots at the Federal Reserve Board? Parrots at CNBC?
The figures show that inventory has decreased. Yet the trend doesn't take into account the burgeoning shadow inventory problem. Like I have said, the banks do not want to foreclose on many homeowners simply because they cant handle the business. They don't want all of these depreciating assets on the balance sheet. Why would you? The various moratoriums like HAMP and other state specific programs that have been run across the country have failed the homeowner but assisted the banks in keeping shadow inventory off of the market. This is the prime reason inventory has decreased, and a bigger reason why housing hasn't yet been totally nationalized.
The only homes that are moving are the ones guaranteed by FHA and packaged by Fannie, Freddie, and GNMA. The first time tax credit also assists greatly.
I just don't understand what the government is trying to do here. Home affordability is still a joke. Home prices need to correct another 15-20% just to be somewhat affordable. Put it this way. If a homeowner has an Option ARM mortgage and is trying feverishly to convert to a fixed, how will this help him when housing prices are still at absurd levels? If he happens to convert to a fixed, his house is still overvalued. He has exchanged one major problem for another. He will now have a fixed mortgage that will quickly be underwater. The government has to accept this fact even though the banks will never do so. The bigger issue here is that the economy matters. Employment matters. Income matters. Take home pay matters. But the SP 500 along with MLS and Case Shiller doesn't think this is a problem.
Home prices have dropped nationally to only 2003 levels. It needs to go back down to 1999-2000 levels before they become somewhat affordable. The banks have obscured the data to their advantage and government just goes along.
The only ones living in reality during the housing boom were people on the sell side who were skeptical that this type of debt/credit expansion can't continue. Fast forward to today - Has anything changed? We still have bankers and government officials telling the rest of us - Just Trust Us. We all know where that got us.
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