What Lies Ahead for the Economy and Housing?

 

Both the economic and housing recoveries are fragile and subject to setbacks. Consumer confidence remains shaky. Housing remains vulnerable as job losses mount. Pending foreclosures threaten to add more low-priced houses to the market.
Courtesy of Foreclosure Guide

The economy does seem to be in the early phase of a recovery as government money from the stimulus package is just beginning to flow into the economy, sparking some spending. Early indications are that overall output is on the rise, even as some parts of the economy continue to shed jobs. Unfortunately, job losses are still outstripping job gains, resulting in a net loss of jobs. The outlook is for further job losses into early next year.

Housing demand, supported by the first-time home buyer tax credit, has shown some improvement since hitting bottom in January. This has stopped the slide in home prices in some markets. In most of the country, housing prices have returned to around their 2003, pre-bubble levels.

Six years down the line, this seems like a reasonable level for home prices in all but the most overbuilt markets. They have excess inventory of houses, still a major impediment to bringing the market back into balance.

Expiration of the first-time home buyer tax credit will remove a key support to housing demand. Unusually strict loan requirements continue to make it difficult for even households with good credit to obtain a mortgage to purchase a house.

This is further complicated by inappropriate appraisals, which have undermined a number of deals. Lack of production credit has limited the ability of many builders to respond to the limited demand that has blossomed in recent months.

– Courtesy of NAHB