If you listen to the chirping analysts on television, 2011 is supposed to be the year that the housing markets finally get themselves turned around. Unfortunately, you can take most of their sound bites and substitute in 2010 or 2009 and get the same effect. The harsh reality is that things are not looking good for the future of the housing market, and a bit of analyst optimism isn’t shifting the raw facts.
Government Interventions A Flop
One of the most frustrating things about the current housing crisis is the way that the talking heads continue to look to the government for a solution. Wake up! Government interventions into the housing market aren’t making things better. If anything, they are delaying the natural course of the market in working things out and allocating time and monetary resources better used elsewhere to propping up the housing markets. The Help for Homeowners program, Make Housing Affordable Act, and dozens more have helped only a few people, according to National Public Radio’s analyst Chris Arnold, leaving millions more laboring under false hopes of aid.
Still, that isn’t stopping the government from trying again. Starting January 26th, the House Oversight Committee will be taking a fresh look at the housing problem. The idea is that a new Congress will be able to make real changes that will help struggling homeowners. Considering that RealtyTrac is already predicting more than two million foreclosures for 2011, it’s not likely that Congress would act fast enough to stop the foreclosures and magically “fix” the housing market, meaning that homeowners and investors alike would be better served looking to themselves for a solution.
Unemployment A Continual Drag
Another reason that the housing market and mortgage foreclosure rates are looking grim for 2011 lies with the national unemployment rate. The Bureau of Labor Statistics reported the December unemployment rate at 9.4 percent, but ShadowStats pegs the real numbers as being closer to 22.4 percent. Either way, if no one is working, or if only half of a two-worker household has steady employment, funds are more likely to be put toward daily necessities than mortgage payments.
Home purchases – needed to get the market moving again – are also going nowhere without economic growth in the cards. Borrowers can’t get approvals despite record lows in interest rates, and few households want the risk in the current economic climate. As a result, with few buyers available to help unemployed homeowners offload their houses, the market is going to continue to be tough throughout the year.
Excess Supply Hanging On
It’s not just a shortage of qualified buyers that holds back the market either. The American housing market also has to deal with the issue of excess supply. The National Association of Realtors estimates as of January 2011 that there are 2.8 million homes available, representing a 7.6 month supply of homes on the market. Unfortunately, their numbers don’t include new homes being built or the number of distressed homes heading for the market. If RealtyTrac’s two million foreclosures are added to the market, the housing supply will nearly double.
More homes on the market – many being sold at depressed prices – means no recovery for the housing market. Analysts may wish to believe otherwise, but numbers are numbers, and they aren’t boding well for those betting on a housing recovery.
Tips To Steer Clear Of The Mess
To steer clear of the housing disaster that’s continuing, ignore all the chirping analysts. There are still paths to wealth in real estate, but to find them, you have to look outside traditional channels. Short sale programs, buying tax liens, or scouting for foreclosures will help you generate cash flow and buy low enough to make housing work as an investment class this year.
The key is going into everything with your eyes wide, wide open. The housing market is not likely to recover anytime soon in the traditional sense, despite the empty promises of talking heads. There is more mortgage misery ahead in 2011 that will have to be worked through before the sector returns to health, much less prosperity. Understanding that framework will help you find profits or at the very least avoid investments that hinge on a housing recovery that’s just not in the cards.