Saturday, October 2, 2010

The Housing Market...why it continues to stagnate

     There are two concerns that the Administration has with the Home Mortgage situation: one involves helping some people keep houses that they were not economically qualified to buy in the first place, and the second one is to promote the recovery of the housing market...both building and sales of existing homes.  I strongly suspect that either goal will prevent the second and, in fact, exacerbate the problems in that area.  Let me explain.  The housing market cannot recover until it bottoms out...until the public is satisfied that home prices have found their proper equilibrium.

As long as foreclosures are pending in record numbers, the market suspects that prices will still fall, money will stay on the sidelines, and lenders will be uncertain of appraisal values.  The Administration has made a judgment that it is good to make every effort to allow as many economically unqualified purchasers as possible to stay in their homes and not be forced into foreclosure or to sell.  But the market recognizes that this artificially clouds the real state of the market: how many homes are out there, will be out there, should be out there,... and when will those questions be answered allowing a logical evaluation and setting of home prices?

Unfortunately, the administration has royally screwed up their attempts to help those homeowners who are "under water" and not able to make their mortgage payments.  The supposed "help" has been difficult to get, hard to work with, and impossible to understand for some...and that ignores the extended time taken, often with not progress at all.

The net result is that the administration is not even accomplishing what they state to be their goal, while the decision to make that a goal is preserving the state of chaos in the housing market.  The administration has succeeded in creating a truly classic "lose/lose" situation.

No comments: