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Economy needs housing to recover

Analysis: Signs of return brightening in other areas; but news is at best uncertain for the real est

Posted: February 13, 2011 1:55 a.m.
Updated: February 13, 2011 1:55 a.m.

In this recent photo, a pending sale sign is posted outside a home in Palo Alto, Calif. The National Association of Realtors said Jan. 27 that its index of sales agreements for previously occupied homes rose 2 percent in December 2010, marking the fifth increase in the past six months.

 

Editor’s note: Part 1 in a series analyzing the housing market in the Santa Clarita Valley.

Inventory in the housing market is plentiful, prices are affordable and buyers are benefiting from historically low interest rates.

Sounds like an ideal housing market, right?

Not exactly.

Based on current conditions, it’s both a seller’s market and buyer’s market, though not in the traditional definition of
either term.

The situation highlights the unpredictable market trends that have dogged the real estate industry in the past few years.

Signs of recovery are brightening the outlook in other areas of the economy, indicating Americans may be nearing the
end of the Great Recession.

But the news is at best uncertain in the housing market. Many experts agree that a full economic recovery cannot be realized without healing the real estate housing market.

Economic pluses
Positive economic news can be seen on a number of national fronts:

- Gross domestic product, the nation’s economic barometer of health, increased 3.2 percent in the fourth quarter of 2010. The GDP is the sum of all goods and services produced within the U.S. borders, so the upswing means the nation is becoming productive again. The increase followed a third-quarter improvement of 2.6 percent in the GDP.

- The U.S. just experienced the best holiday retail sales season since 2006. Reports in 2011 are that people are spending more and saving a little less, reflecting pent-up demand to get back to normal.

- Strong gains in the stock market have been mounting in the past several weeks.

Historically, two key actions have marked the end of recessions: job growth driven by the private sector and increasing home sales.

On the job front, a critical piece of any recovery, first-time jobless claims have fallen for the past few consecutive weeks, and unemployment claims continue to fall.

Recently Monster.com, the online job-seeking and recruitment site, announced an increase in job demand activity in 28 major markets.

Tough choices
The burst of the housing bubble that helped plunge the country into the Great Recession left homeowners drowning in mortgage debt, struggling to make unaffordable payments, suffering from job losses and facing “underwater” mortgages — making payments on mortgages that are far higher than the current value of their homes.

A number of measures were enacted to keep the real estate market afloat, including loan modifications, short sales and tax rebates for homeowners and buyers.

Legislative changes were made to protect consumers in the precarious market: eliminating predatory lending practices, shoring up the integrity of the home appraisal process, protecting sellers from collection of debt that was written off by the lender in a short-sale and making it illegal to collect advance fees in a loan-modification application.

These measures have helped some. On the whole, however, they barely served as life preservers to U.S. homeowners struggling to stay afloat in the face of the staggering recession.

Nearly 3 million homes went into foreclosure across the country in 2010, according to estimates. Possibly millions of homes remain in limbo today.

Five years into the housing sector’s crash in California, none of the best-intentioned efforts have stabilized the market sufficiently to poise it for recovery. At best, the efforts staved off a catastrophic collapse of the market.

“If we hadn’t had a moratorium on foreclosures we would have gotten through this by now,” said Pam Ingram of RE/MAX of Santa Clarita. “We can’t start to recover until we address the backlog.”

On Tuesday: The good news and the bad news in the SCV housing market.

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