Housing market decline means value for some; continued pain for others

The impact of the housing market has impacted people differently. Those who need to sell their homes or are currently underwater have faced never-ending challenges while others are experiencing the bargain of a lifetime. The two issues are created in part due to the country’s biggest banks and lenders owning over 872,000 homes, a number that is almost twice the amount in 2007. The index of home prices is at its’ lowest point since 2002. In addition, a million more homes may fall to foreclosure over the next two years. What was long expected is now confirmed; while many areas of the economy are improving, the housing market is in a double-dip housing recession. Where do we go from here, is there any end in sight? While many lenders are starting to take a loss in an effort to side-step the foreclosure process, the back log of homes remains on the market and is expected to only worsen. Unfortunately, the lenders are often overwhelmed and the system is unable to handle the volume. In reality, the issue comes back to simple economic measures of “supply and demand” and in most markets the lack of demand has helped contribute to the overwhelming supply.

Economic stimulus, low interest rates, and those available “cash buyers” or investors have helped make it more affordable to buy a home than any time in the last decade. In certain markets there are substantial value properties for those in the position to jump into the housing market. For those able to have a job or who are downsizing in retirement have great advantages and live comfortably (financially) in many markets, especially outside of the Northeast. Unfortunately, consumer sentiment is so weak that there simply aren’t enough interested buyers willing to take the plunge to real estate. They believe it is much simpler and more cost-effective to rent. A third of consumer wealth is from home ownership and when prices decline, you have less tolerance for risk. When fewer buyers are willing to buy a home coupled with reduced home prices caused by foreclosures and short sales, the resulting occurrence is the “spiraling effect” downward of home prices.

What is the answer to this major problem? Many certainly have tried their ideas but the problem is growing by the year. Local, State and Federal agencies have tried many stop-gap programs, but the problem is just too large and too costly to repair. Fighting among political party lines has created a stalemate to discover new solutions. Furthermore, budget issues and reduced tax revenues have all but guaranteed there will be no real solution. The banks, in many cases, have proven to be as ineffective and inefficient as government at solving the problem.

What does the future hold in housing? No one really knows. But one thing is for sure – someone will always find a way to make money while others suffer. Regardless of home values that are available, the housing collapse should be a concern for all Americans.