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OK, I
just want to make one thing clear. Many people assume that because of what
I've written about in my last two books, at my other blog, and
here at Financial
Armageddon, I relish the thought that the world is
going to hell. Not true. Although I've always been somewhat cynical about
things, the fact is that I'd be much happier -- and so would my family and
friends -- if we could move past the ugliness of the past four years and
return to some kind of normalcy. But every time I look around, it's hard not
to see that so many of the problems that got us to this point have not gone
away. Indeed, one big contributor to the mess, an inflated real estate
market, remains a festering sore. In the following MarketWatch (via
Yahoo! Finance) report, "The Housing-Market Recession Is Not Over," an
analyst who doesn't appear to be a shill for the National Association of
Realtors paints a pretty negative picture:
Why
you shouldn't be overly optimistic about real estate right now
After
years of hearing how home prices are plummeting and foreclosures are
mounting, consumers want to feel hopeful about the housing market — but
maybe they're being too optimistic.
In a
presentation to the National Association of Real Estate Editors in Austin,
Texas, last week, Stan Humphries, Zillow.com's chief economist, pointed to
four myths he said consumers are latching on to as they try to make sense of
recent housing statistics.
The
four myths:
1. The
housing recession is over. It's not, Humphries said. He
estimates the bottom in home prices won't come until the third quarter, at
least from a national perspective. Doug Duncan, chief economist at Fannie Mae
and also a speaker at the conference, agreed with that estimation.
2.
After markets hit bottom, prices will rebound to boom levels. Not
going to happen, at least for a while, Humphries said. "Once we hit
bottom, the bottom is going to be a long and flat affair across the
markets," he said. "What we're going to see once we hit bottom is
the second phase of the housing recession... that second phase is one of
being flat."
3. The
worst of the foreclosure mess is behind us. More wishful
thinking, according to Humphries. He estimates foreclosures will peak later
this year, then remain elevated for a while. Rick Sharga, senior vice
president of RealtyTrac, an online marketplace for foreclosure properties,
said he doesn't envision foreclosure activity stabilizing until late 2011.
4. The
tax credits saved the housing market. With or without
a tax credit, those who bought would have done so anyway, Humphries said.
"The biggest impact [in home sales] we believe were low prices... low
interest rates and the unsung factor here is the ramped up lending by the
Federal Housing Administration."
Still,
it's easy to understand why many homeowners want look on the bright side.
"They
went from what everyone thought was a lucrative asset to something worth a
lot less than they owed on it," said Douglas Culkin, president of the
National Apartment Association, in a phone interview. "We all want it to
get better," he said.
Some
want to finally sell their homes and move on with their plans. And homeowners
are tired of thinking their houses are bleeding equity, losing value like a
new car driving off the dealership lot.
As for
prospective home buyers, even if consumers are feeling confident enough to
take an extra trip to Wal-Mart these days, many are not going to jump in and
spend on a large-ticket item like a house, said Gail Cunningham, spokeswoman
for the National Foundation for Credit Counseling.
"The
reality of the situation in which we find ourselves today has sunk in with
people," she said in a phone interview. "If a foreclosure hasn't
been a part of their life, it has been a part of someone else's life... and
they've seen the pain that inflicts on the family."
That
perception isn't going to fade quickly.
It
makes sense to be gloomy
(Hat
tip to For What It's Worth.)
Michael
J. Panzner
Editor, Financialarmageddon.com
Michael J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the
author of Financial Armageddon: Protecting Your Future from Four Impending
Catastrophes, published by Kaplan Publishing.
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