Nation Dependent on Real Estate

Everytime we sell a home ..it employes approximately 28 people ie: home inspectors, title companys, home warranty companies, repair people, banks and credit unions, etc. etc. you got the picture...
The nation received a serious full body cleanse and we are starting to take baby steps up a rickety old staircase. One thing is for certain the health of our nation is definitely dependent on real estate. On Friday, the Household Surveyed Unemployment rate unexpectedly fell to 9.7%. However, we received a 20,000 drop in payrolls and a revised 150,000 drop in December. Markets do not like the uncertainty and tend to bounce like a child who has outgrown his hippity hop. It was also pleasant to see strong support in the mortgage back security market pushing rates an 1/8% lower by week end. Now that the jobs report is behind us, the marketplace will put all focus on sovereign debt anxieties abroad. As you can see from the attached rate sheet interest rates are amazingly low and as a result, the bottom end of our housing market is rebounding faster than you can say, “Pneumonoultramicroscopicsilicovolcanokoniosis”. In case you’re wondering, it is a lung disease contracted from the inhalation of very fine silica particles, specifically from housing located close to a volcano. California is silica particle free among other things so demand is always relevant and as I mentioned last week, the leader of the pack. Combine the ingredients of lower affordable prices, unusually low inventory, record low interest rates, tax credit sprinkles and you have a recipe for a step shaped housing recovery ready to meet the upper end somewhere in the middle. Across the board it also might be an ideal to time to consider selling if loan modification, payment affordability and job security are in question. Parents out there, now is the perfect time to invest and keep the kids from moving back home. Dad?
A consumer survey conducted by Thomas Reuters and the University of Michigan indicated that sellers (banks?) are holding the housing market at low levels. Approximately 75% of homeowners in the survey viewed current home buying conditions as favorable because of attractive home prices and low interest rates. In the fourth quarter of 2009, homeowners did see some improvement in the market. A 53% reported a decline and one year ago the figure was 60%. The number of homeowners who expected their home to gain value over both the short and long term also increased by 24% while only 15% expected a further decline. This is a significant improvement over the attitude one year ago when 26% of respondents expected a loss in value. There has been much debate as to the amount of shadow inventory that has yet to hit the housing market. Many analysts speculate that a continued rise in prime mortgage delinquencies and high non-prime loan foreclosure rates will add to an already inflated level of housing inventory, pressuring home prices to lower. I have a slightly different perspective. To reduce the cost of maintaining the condition of foreclosed properties, banks have delayed the liquidation process and allowed delinquent borrowers to remain in their homes. In addition to that, by delaying the liquidation of foreclosed properties, banks have avoided large asset value write-downs. I expect banks to continue to utilize this strategy, but feel it won't last forever. Once the housing market starts to pick up recovery momentum, banks will begin to slowly liquidate their inventory of foreclosed properties. Hopefully they will do so in a manner that does not greatly disrupt local supply and demand.
Credit and budget changes can certainly be disruptive to both supply and demand. I don’t want to get into politics here but feel the need to vent about something other than tight credit. The new budget states that if you make over $250,000 a year you will be limited to the amount of mortgage interest you can write off. What a brilliant idea this is only to be outdone by limiting their deductions to charity. I am all for helping the middle class as I am sliding to the bottom but come on people! We are having enough problems with the high end markets and then some. Next week I am going to discuss what I think really needs to happen for a fix-all-solution to the economy. In the meantime, remember to have patience and passion in what you do. You cannot climb a mountain if you will not risk a fall.