The breathless reporting of single family housing permits rising to the most since that barn burner year in housing of 2010, should be taken in perspective. The good news is that permits are now all the way up to 50% of what economists consider healthy or normal.
Throw in a little home builder confidence rising to 35 when a reading below 50 means conditions are viewed as poor, and we have the mirror image of consumer confidence at 62 on a scale of 100.
In any economy good or bad, there are always going to be areas that are doing well, such as in the states that elected Republican governors in 2010 and have falling unemployment, and areas that are doing poorly like those still in Democrat control.
Where sane rational people are in charge, and where the federal government has less control, places like Pennsylvania and North Dakota are booming due to the energy industry. No, not the green energy fairy tale, Bonnie and Clyde Obama donor heists of your tax dollars, the oil and natural gas industries.
There are numerous other local markets doing well such as Springfield Illinois. Year to date the number of closed home sales are up 9%, the number going under contract up 15%, and the median sale price is up 4.78% to a record $115,000. Yes, Springfield is an affordable market.
But please be careful how you interpret local housing reports. What are these numbers being compared with? In Springfield to the worst year for home sales since 1998, with interest rates that averaged close to 4% as many homes sold as in 1998 when interest rates averaged close to 8%.
What could have taken one of the nation’s most stable and predictable housing markets down 30%? Jobs and consumer confidence. The Springfield market falling to such levels is as uncommon as the words individual liberty, and property rights being spoken by Obama (as Mark Levin says).
Believe me, not all is rosy on the national housing front no matter how the liberal mass media tries to spin the story. Here are the threats, challenges, and obstacles the housing market faces in the near future.
There are ten million underwater mortgages, three and a half million severely underwater, and shadow inventory of homes reported by Forbes on June 26. There are hundreds of thousands of homes banks are holding in inventory to avoid flooding the market and cause prices to fall.
Realty Trac reports we will see the pace of foreclosure notices pick up this year, close to the record three million foreclosures in 2010. You know the glorious year in housing that building permits just matched?
Seems home builders have just started the most building jobs since the glory days just in time for another Recovery Summer. Who will buy these homes? How many are contract homes compared to speculation? Regardless, builders will be disappointed as Obama’s ‘you didn’t make that happen’ governing philosophy kills more jobs driving down demand for housing.
The debt bubble is a threat. Bill Gross manager of PIMCO said: “The U.S. Treasury market is considered the cleanest of “dirty shirts” for investors.” The slow motion train wreck in Europe will ultimately finish its crash and begin to rebound. Then American treasuries won’t be the cleanest of the dirty.
When investors slow the purchase of treasuries that finance unconscionable government spending the inflation freight train arrives at the station. This will have serious implications for the housing market.
If we can sell as many homes at 4% in 2011 as we did in 1998 at 8%, how many can we sell when mortgage rates are 10%? How many people with mortgages at around 3% will rush out and buy a home as a matter of convenience? You know the move every five to seven year American? None that don’t have to move!
Then there’s taxes. Merely an Obama campaign strategy, with dire consequences. Populist rhetoric that the rich aren’t paying their fair share, they’re greedy, didn’t build their own business doesn’t exactly encourage job creation. Truth is Obama could raise the taxes on those earning over $250,000 and it will have no impact, except to further depress the economy, jobs, and consumer confidence.
The bottom line; under water mortgages, shadow inventory, foreclosures, abysmal labor market, the debt bubble, inflation, and Obama tax threats are all lurking and will batter housing.
If your local housing market is performing well today, you better take advantage while you can. Although real estate like politics is local, it’s impossible for housing to escape the consequences of irresponsible government, especially the anti-capitalist Obama government.
The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.