Once again CNBC's Diana Olick hits the nail on the head with another insightful blog post about what is really going on with the housing market.
With all of the talk about a housing recovery, the one thing a lot of talking heads have taken their eye off of is the job market and how that is going to complicate a housing recovery.
According to the FHFA, "Prime loan delinquencies increased by 70 percent" from the previous three month period.
In other words, the number of good loans that are going into default are surging as a result of the economy, not just poor loan underwriting. What this means is that this housing depression has come full circle. The housing crisis caused this economic downturn, and now the economic downturn is putting additional pressure back on the housing market. It is a negative feedback loop that has not shown any sights of mitigating. In fact, you could make the case that things are only now just beginning to accelerate further in the wrong direction due to rising foreclosure and unemployment numbers as well as losses in home values.
The FHFA cites that, "Curtailment of income (34.1 percent) ...this can be salary reduction or self-employed losing clients" is the number one reason why Americans are going into default.
The law of supply and demand is alive and well. More Americans are losing their home than there are Americans who are buying a home, the result is predictable. The solution is to provide incentives for Americans to invest in real estate and incentivize them to hold the investment by making real estate depreciation available to all Americans, not just those making less than $100,000 a year.
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