Housing Market Hasn’t Bottomed Yet

The arguments of Bloomberg commentator John F. Wasik make a lot of sense. Wasik writes

We might be looking at a lost generation for U.S. home values.

Far too many analysts are calling a bottom to the housing market after home prices in 20 metropolitan areas declined at a slower pace in February, according to the Standard & Poor’s/Case-Shiller Index.

Don’t be blinded by the glint of optimism in headlines about rising consumer confidence and slowing price declines. Demographic and market realities tell a more sobering story.

You won’t see a widespread housing rebound in an economy in which 600,000 jobs a month are lost and foreclosures ravage the most overleveraged areas. These are just the visible barriers to a recovery.

Mortgage lending has also been an unusually tightfisted process of late. Lenders are demanding a 20 percent deposit for home purchases, and want impeccable credit ratings. About 45 percent of U.S. banks surveyed by the Federal Reserve said they had “tightened their lending standards on prime mortgages.” I suspect that number is much higher.

Then there’s the reality that the market is glutted with homes. A record 19 million homes stood empty at the end of 2008. […]

I’m not sure that the housing market will remain stagnant for a “generation,” but given the massive shock to the economy provided by the mortgage market collapse and the Obama’s administration doomed Keynesian policies that will unleash inflationary forces, recovery is definitely not around the corner.

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