Fed chairman Bernanke’s assessment yesterday for continued slow growth was not what the doctor ordered. Clearly the economy is getting better, but at a projected 3% growth, not nearly fast enough to help the millions of un- and under employed. The impact on housing would seem to be in buyer confidence. Without confidence in one’s economic standing and security, consumers hold on tightly to their wallets, and hold off making big purchases, like cars and homes. Unfortunately, this predictably will put more pressure on home prices. It seems the Bears may dictate the coming months.
The irony is that there continues to be nuggets of positive news in real estate. Tuesday’s report that sales were down nationally was an example of more bad news-good news. Yes sales were down, but foreclosures, while up in total numbers, remained stable at 31% of the market place. In other words, foreclosures are still a big problem, but their market share has stabilized… Bad news-good news. Regionally, the flat sales in the west pushed against the tide nationally of declining numbers; a little like holding a Tiger by the tail.
Yesterday CoreLogic reported that the “shadow Inventory” – those homes at least 90 days behind in their payments – declined to 1.7 million this year from 1.9 million last year. Though no one said it, I suspect that’s the first year over year decline in this number since the housing bubble burst. 1.7 million homes however, is still a very large number; approximately a 5 months’ supply of homes not yet on the market. Bad news-good news… The fear of the unknown and threat of a tsunami of foreclosures truly is the mouth of the Lion for housing.
So in coming back to the general under-performance of the economy, I think it’s the effect upon our confidence that is the most damaging. And while things are getting better, they may not get better fast enough. In the mean time, I hear you can pick up a beautiful home in the Emerald City for a song… and like Dorothy said, “There’s no place like home”.