Real Estate Marketing & Beyond
So what's with all the recent news about the housing market "stabilizing" and builder stock prices rising?
More foreclosures in the offing?
It seems that something is amiss when you compare recent media reports with the actual housing data recently provided by William C. Dudley, the President and Chief Executive Officer of the Federal Reserve Bank of New York. In remarks dated January 6, 2012, and presented at the annual meeting of the New Jersey Bankers association, Mr. Dudley underlined the ongoing housing crisis, and stated that his staff research indicates that 1.8 million foreclosures could take place in both 2012 and 2013. That's a whopping 3.6 MILLION NEW foreclosures, on top of the 2 MILLION he said are already in the pipeline.
It would seem that the mortgage bankers and the general media are not looking at the same data set when it comes to evaluating the current state of the housing crisis in the U.S. The general media would have us believe that housing is beginning to improve, sales are up, and foreclosures are down. Indeed, Realty Trac, a foreclosure tracking service did say that foreclosures were down 34% in 2011. However, this was largely due to the robo-signing scandal. But those issues are being dealt with and the NY FED Chief is saying that foreclosures will indeed increase significantly this year and next. Below is his statement, quoted directly from the report:
"Over time, without an improvement in housing and the labor market, more loans will become seriously delinquent. Moreover, absent more aggressive efforts to find economically efficient alternatives to foreclosure — loans already seriously delinquent and in foreclosure will become real estate owned by the lender, or REO. My staff estimate that the flow of properties into lender REO in 2012 and 2013 could be as high as 1.8 million per year, up from around 1.1 million in 2011 and around 600,000 in 2010."
Dudley also stated a number of reasons why housing continues to struggle, and pointed out that this presents a real drag on the larger economy that will not go away until the problems with the housing market are addressed.
One of the more startling statistics given by Dudley during his presentation was this:
"Since home values peaked in 2006, homeowners have lost more than half their home equity—about $7.3 trillion—and expectations of future gains have also declined. At present roughly 11 million households are in negative equity with the aggregate amount of negative equity estimated to be roughly $700 billion."
On the one hand, it's been a long, deep recession, and supposedly it's been over for quite a while now. On the other hand, there is plenty of evidence to indicate that housing is stuck in a vicious cycle of negative equity and tight credit, leading to more unemployment and more unemployment leading to more problems with delinquent mortgages and foreclosures, etc., etc.
The challenges presented in this unique situation are great. The early reports that housing is recovering would seem to be overly optimistic in all but the most in-demand areas.
One thing about housing that is always a constant: The fundamentals speak for themselves, and the fundamentals dictate where the market is really going. And right now, it's very tough to argue that housing's fundamentals are pointing to any kind of significant or lasting recovery where prices and demand are concerned.
Image courtesy DigitalArt via freedigitalphotos.net
