Much ink has been usurped on articles, reports and analysis about the housing market over the past 18 months. Like many other industry speculators, I’m inclined to believe the worst is behind us with respect to the economy. As far as the housing market is concerned, an industry come back is much more complex. Why….simply because we have to consider so many factors before we can to determine where the Industry is headed - for example: home values, the credit availability, interest rates, government programs,tax incentives, and unemployment. All of these elements impact the home owners ability to pay their mortgage, or the borrower’s access to credit, and their ability to purchase a home, or keep the one they’re in.
It has been reported that over two trillion dollars in bad mortgages will never be repaid. As housing prices continued to fall, analysts speculate that recovery in the housing market may be nearly five years away. Investors are not likely to want mortgage-backed securities from Fannie Mae - particularly if their loans are risky. Therefore, days where banks blindly loaned to home buyers with low credit criteria are long gone. This is not exclusive to subprime loans. All mortgages will be difficult obtain for while.
Much like the Cash for Clunkers program, the housing program offering an $8,000 tax credit to First-Time Home Buyers, was a great success. Increased housing sales in 2009, may have initially created false hope that the market was on the rise. As it turns out, 80% of FHA mortgages were First-Time Home Buyers taking advantage of the tax incentive. We can expect that once the First-Time Home Buyers program expires, home sales will fizzle. The Spring season normally renews hope in the housing market as sales and home values tend to increase during this time. Unfortunately, the market is not illustrating any signs that this trend will be realized this spring season.
Part 1-of-2
- K. Reilly
Cohn-Reilly Report
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