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The Effect Of Unemployment Upon Housing For 2010

man with box For the eighth consecutive month, year over year job losses have increased in all 372 U.S. metropolitan areas, and many are concerned about the effect of unemployment upon housing for 2010. How do job losses relate to the recovery and, more importantly, to the coming year? As a lagging indicator, employment is said to follow the economy, so it’s logical that we not expect joblessness to decline until the economy is improving. However, while employment may follow economic trends, it is an important indicator of what we can expect in the short term; and the relationship to the housing market is especially important for those of us in real estate related businesses.

With more people out of work since the Great Depression, housing has struggled. Lenders in some areas have been so consumed by foreclosures that many of their customers remain in their homes more than a year after having stopped making mortgage payments. And requests for short sales have been overwhelming, with banks sometimes taking months to respond, if they respond at all. In many cases lenders have proceeded to foreclosure even after agreeing to work with a short sale.

We’re all aware that the housing boom is over; what some fail to admit is that it’s not returning—ever. We're faced with a new market that will require different tools and strategies. The old market that flourisned and grew into a housing bubble was created artificially, just like the “stabilization” of the market that has recently been declared. Five years ago we weren’t selling homes because the economy was experiencing explosive growth; homes were sold because we experienced an explosive growth in the availability of easy money. And now we’re attempting to stimulate the market in a different fashion. It won't work.

While the First Time Buyer Tax Credit added about 350,000 additional sales, those sales were purchased by the taxpayer for approximately $43,000 each. Even if the program is extended—and there are some indications from Congress that an extension of some sort may be in the offing—it will do little to restore a market struggling under the weight of enough foreclosures to equal more than a year of sales.

Jobs must be created; and when we see positive growth in the jobs numbers, we’ll begin to experience true stabilization. Until then, it’s best to remain lean and to work to define our piece of the “new economy.”

Source: Bureau of Labor Statistics

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Posted by John Mulkey, Housing Guru on 10/02/2009 07:34 AM

Comments (95)

Job Losses and a Housing Recovery in the ActiveRain Channel

unemployment and home sales, economic crisis, housing recovery

Originally posted at: BluefoxToday blog : The Effect Of Unemployment Upon Housing For 2010

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95 Comments on The Effect Of Unemployment Upon Housing For 2010

OCT

Agreed. However, those 20Million home owners with negative equity are not in the market and that is going to continue to be a drag on the consumer for a decade. Sad but I believe it to be true.

Lenn - I agree, and there are several other groups who either can't or won't enter the market because of fear, not waning to sell at current prices, etc. That's why I think wishing for a return to the "good times" is futile. We must deal with both the realities of the market of today and of the future which will be vastly different from the recent past.

John,

I agree that jobs will lead the housing recovery and we won't see any significant stabilization until that happens. I'm a bit leery of the lull that may have been caused by the tax credit borrowing buyers from the future.

Even if they do extend it, we may have already borrowed those potential buyers with the frenzy created by the tax credit.

Brian - That's exactly what the "clunkers" did for auto sales.

John,

The Vegas housing market is very affordable now and mortgage rates are favorable, but high unemployment, over 13%, here is slowing any recovery plans. When it finally comes it's likely going to be slow .

Hi John - employment is the last element to recover. Employers won't bring back more employees until their forecasts are favorable and business picks up. This presents a difficult situation for many families (some of which may lose their homes). There are many affordable homes in my area as a result of current market trends and we do find those out there that are looking for a good deal.

The problem is that it's a vicious cycle, with each sector impacting other sectors.

Esko - The recovery won't look like any we've seen in decades.

Jon - There will be many more homes lost because of unemployment.

Leslie - And we have to break the cycle before we stabilize.

John - we felt this in housing first. Now the commercial sector is starting to crumble. I predict job losses will continue to get worse with the high rate of business failure just in the past couple of months. It is escalating...not declining. You're right...we're going to be in this mess for awhile. Better to just buckle your seatbelt and hang on. Thanks so much for the information. As always, you're spot on!

Lina - No one really knows just how bad the commercial sector will be, but it looks pretty serious. Unless the banks work out a way for owners to refinance, many will wind up in foreclosure. And I agree that it will be a wild ride. Thanks for the encouragement.

OCT

I totally agree as well...gotta get those job numbers up to reduce some of the inventory!

Thanks for sharing the hard facts. My belief that rent to own and seller financing will be very popular over the next ten years until we get out of this mess and people have good credit scores.

We’re all aware that the housing boom is over; what some fail to admit is that it’s not returning—ever.

You just frightened a thousand Realtors with that statement. .

A lot of them are still waiting for happy days again.. .

One of the labor static that does not get mention but plays a huge role, is the unemployed that have used up their unemployment benefits and are still out searching for a job. I was checking out at Costco recently, and the checker said that a new Sonic restaurant was coming and they had over 2000 applications for 5 jobs that they were advertising.

I think that finally the stock market is catching on

Melissa - Today's job report look as if we're still going in the wrong direction.

Harry - We'll definitely see some creative sales tactics.

Fernando - We won't be dancing the "happy dance" for some time.

Lorraine - Another unreported statistic is the number of self-employed whose income has either been reduced or stopped altogether.

Moshe - Yes, we'll see if it continues.

John, A recovery hinges on jobs. Employment. Until then, it's lean and mean. Kate

I don't see business investment while the current anti business administration is in power. That means no jobs, other than govt. hiring.

Kate - Jobs are certainly the key to a housing recovery.

Jon - I'm afraid we'll see a higher than "normal" jobless rate for some time.

OCT

Absolutely! I hear fellow Realtors tell people that the market is on the upswing. It just isn't possible with our area job losses and the large amount of forclosures that are yet to come through.

Home prices are down 35% in my area on Long Island - from their peak.

IF rates remain low - and do not exceed 7% for the next 12 to 18 months -

as prices continue to decline - a "tax credit" will mean very little and buyers - as long as Obama's incredibly stupid tax hikes and out of control spending do not overwhelm this country and there isn't a run against the dollar (fingers crossed) - the natural tendency of this free market economy is for people to sieze the day and the time. New businesses are and will be created.

I believe the tax credit caused somewhat of a frenzy - but most buyers that I've spoken with - first timers purchasing average priced homes - weren't as much motivated by the credit as they were the low interest rates and the prices being down so low.

So I disagree somewhat.

But I do agree that you, (agents) must position yourself to be where the money will be. If you're not already - you're behind the eight-ball big time.

If unemployment rises over 12/13% - yes - that will be very bad - but worse off - if oil rises and our dollar takes a dive (as our government continues to print money and buy it's own debt) - forget it - ALL BETS ARE OFF AT THIS POINT. We're talking an entirely different realm that America hasn't seen since the 30's. If that happens - "you ain't seen nothin yet".

Oh by the way - all those "crazy mobsters" in Washington in September...that's what we were there for - to wake up America and have you call your congress rep and let them know - TO STOP SPENDING US INTO OBLIVION!!!!

Leaving this economy alone - lowering taxes and letting the FREE market take care of itself (with some regulations of course) - is the only answer. LOWER TAXES FOR "RICH, POOR AND THE MIDDLE" - that's the answer. Period. that will lead to job recovery, housing recovery - American Recovery.

I just recently had a conversation with buyers on the same topic. They wanted to know what to expect in five years if they bought now. I told them the bubble was over and wasn't coming back. That it is difficult to predict short term return.

Jobs that pay well with decent benefits ar the only thing that will drive the economy out of it's funk. It's gonna take YEARS to do it!

Jobs are absolutely the key! I have a question - in your experience, when many new long term jobs were being created, what was the government doing - spending more and more money, leading to tax increases - or cutting taxes? Or something else?

You speak the truth, my friend! Hang on, it is going to a long slow spiral down and down and down as the New World Order crowd of which both major parties have long since been a part and party of. Our status has slipped steadily with each job that has left since the days of Ronald Reagan's union busting and Lee Iococoa's wage and job concessions. The good high paying jobs left long ago, and no one cared until it affected them. Our economy is such that our only hope is to flip hamburgers and sell them to each other, or be WalMart greeters. Those jobs do not support the kind of money needed to buy a house in today's economy, or even to keep the one most Americans are struggling to make payments on.

It is impossible that we can recover without good paying jobs. Sadly we are still losing jobs at a drastic rate to China and other nations.

Of course there are more people without jobs right now than there were in the Great Depression. The population of our country is much larger than it was back then. Yes, there will be another boom. And it will make the last boom look boring. Below is a chart of raw census data reflecting live births in this country from 1940-2005. On the left is the Baby Boom. The last boom can be attributed to their activity. In the middle is the 1970's - births fell to levels which mirror WWII. But the mountain on the right represents the coming generation - the Echo Boom - who outnumber the Baby Boomers. These are our future first time buyers. The births began to rise again in 1980, and the average age of first time buyers today is 30. They are on the threshold of financial maturity and readiness to purchase their first homes. When they begin entering the market, every single buyer in the right "boom" has the potential to generate three additional sales in the left "boom", as they buy a starter house and begin a trade-up cycle within the Baby Boom. The tax credit has been effective because it appealed to this younger generation and encouraged "some" of them who are financially able to enter the market a bit earlier than they otherwise would have. The mistake that was made in structuring the tax credit was to allow these kids the option of buying something vacant from a bank, instead of restricting the credit to purchases of owner-occupied only, to ensure maximum activity from every credit and to ensure the tax money being given by the taxpayers was benefitting the homeowners. The second mistake is the reluctance to acknowledge that in 2006 the average age of first-time buyers in this nation was 33, and the drop in births occurred in 1973. Beginning in 2006 and for four more years, our industry would suffer from a lack of first time buyers (and stagnation of trade-up activity, falling prices, rising foreclosures and halting new construction) because the first time buyers we needed simply were not born.

ALl we can do is adapt to the local market that we serve and run "Lean and mean." It's all about price, period. No jobs locally, prices go down. It don't matter to me what's hap[pening in other states or other cities for that matter, it's what's happening i my immediate local market that effects me and my clients.

If you don't like the results of what you do to make money, add to it or change. There are many opportunitie that pay very good on a part time basis, that can tide you over until the economy gets better, or will allow you the option of geting out of real estate alltogether and pursuing it full time. It's just a matter of having choices, and deciding whether to make them or not. Stay doing what you're donig and you'll keep getting what you got.

I made my choices... I switched to the HUD and foreclosure market (as that is the only game in town here locally) and I', supplimenting my income by building another business from home with FHTM. Both of them are work, but it beats sitting in the office or home having a pity party.

Anyway you stack things it will be slow recovery. As a majority of our economy is drivien by consumption, we need employment to come back. One potential help is the savings rate is increasing and eventually those who are saving will begin to spend again, thus increasing demand for goods and services and spur an increase in employment.

If we all agree that jobs are the key then why does it seem that the administration isn't aware of this?

www.TheBeninsonAssociates.com for western connecticut properties.

One aspect that is not figured into the unemployment numbers is that of the business owner who is now out of business!! Realistically, this brings the unemployment figure well above 15% at this time...if not more. It takes some education of the mind for people to really grasp the gravity of our current situation. You definitely have to think on your own and read the more credible news sources if you want to learn the truth.... Tough times do not go away overnight...and this one is a doozy!

Meagan - While some areas have done quite well, the overall market is still struggling and will be for some time.

Thomas - You're right about the many potential scenarios that have the potential to destroy what remains of our economy. We'll see what happens.

Marian - Buyers need the truth, but there are good reasons for some to buy; and there are some great bargains.

Joe - I agree, and currently don't see very many of those good jobs on the horizon.

Joetta - Small business drives jobs creation, and small business responds best to tax incentives--not higher taxes.

None dare - I've been developing my "greeter" style--just in case: )

Definitely, the lenders need to come up with some additional alternative guidelines for a home owner to stay in their home. Example, someone that has been making payments from their life savings, and does have a job yet or is just getting back on their feet financially - could the DTI be lowered, or could they work with the homeowner based on their ability to pay from their savins until they get a job? It's the strict guidelines that are keeping many that have a good chance of moving forward financially, from getting the loan mods, or refinancing. I understand where the lenders are coming from, however, someone that shows a favorable potential at being able to make the payment, and stay in their home, shouldn't they be given that chance? I think so.

Marvin - obama is only concerned with his agenda. That means appeasing his voter base and they are the low to low/middle income people. Every program he comes up with, no matter how rediculous has no benefit to those going o pay for it.

Our political heroes will most certainly continue to print money and help artificially prop up certain sectors of the economy until after the 2010 elections...how else will they keep their congressional seats? After that, we will most certainly pay a heavy price that will make today's economy look like we're in a boom.

Enjoy the good times right now and be thankful for that "hope and change" thing. Seems to be working out pretty much as many had expected.

Our market in Central Virginia is BLESSED to have the University of Virginia Med Center which is expanding, the new Martha Jefferson Hospital campus being built and the expansion of the National Ground Intelligence Command * all bringing in new employment to the area....Virginia has a very LOW unemployment rate and our areas rarely gets above 5% which is supposed to be healthy in some circles....I wish everyone had a job and everyone had a home; however, this administration is making it very hard to realize the American Dream!!

John, thanks for the post. As a nation we were lulled into the "excess" mindset. Like the frog in the slowly warming pot on the stove. Yes, it is time to get lean but we will be reeling from this economy for some time to come.

John, as usually a very well written piece. I read the other day that even Sweden, cut income taxes to stimulate job growth.

The other sad part about this are the people who had good credit when they lost their jobs are now facing credit issues. If people do find another job it may take them one to two years before they can get a loan due to credit issues caused by job loss.

The bigger problem we have is that people who are getting un-employment who really could make the payments on their home are not because the value has gone down so much. They choose to pay their expensive car loans, cell phones, internet, and credit card bills. I think that any un-employment funds or any type of government funds should pay for a person's home and food first and then the rest. Maybe we should have loans where the bank splits the difference with home owner either postive or negitive when the home sells.

Job growth is the key to a economic recovery. If the tax credit is not extended, it will be interesting to see how it affects first time buyers. I think those that were on the fence are off and have bought a home. Those still on the fence, have other factors holding them back; job securtity, excessive debt, credit troubles, etc.

I agree that jobs will lead the housing recovery. However this will be a very slow process. Only time will tell, and we all know that life repeats it's self over and over again. I see opportunity for GROWTH in so many ways. You can see your cup half full or half empty. The choice is yours. No matter what your right.

John

You are absolutely right! Job growth is a critical factor in the turn around of the economy and real estate market. What we need are more jobs which pay a middle class wage so people can qualify for their mortgage.

States, Cities and Counties must continue to focus on attracting new businesses which will create employment. In rural counties there are specific loans available at low interest rates for companies which will create jobs. Commercial banks are now making low interest loans on businesses for qualified buyers and "business expansion" loans for profitable companies. I am specifically referring to Seattle, WA as I cannot speak for the entire country.

As realtors we should all become aware of key leading economic indicators, ( a good source of information is the OFFICE OF FINANCIAL MANAGEMENT for the State), what the median wage is in the areas we live and work. Finally, we must become more politically involved in decision making and hold our politicians accountable for making wise decisions which will create more jobs which will provide economic stimulus.

The GREEN JOBS now available are an attempt to create and stimulate the economy.

Susan - I'm afraid you'll wait a long time if you expect to have another housing boom in the near future. The new boomers you describe will have to have jobs, well-paying jobs, in order to purchase a home; and the economy isn't likely to attain significant job growth for several years. Wishing just won't make it so.

Ray - The new market will demand dramatic changes.

Mark - But any increase will be slow.

Marvin - That's the $64 question.

Kathleen - If you figure in all the self-employed the number is 20% or more.

Thanks for the well thought out post. I'm going to go ahead and reblog it for the benefit of my readers who may have missed this.

Carolyn - Lenders are not yet being very cooperative.

John - The administration certainly isn't focusing on "Main St."

Guy - Politicians are doing what they do best.

Wallace - You're fortunate to be in an area of stable employment. Most are not so lucky.

Eugene - And I suspect that recovery will be a loooong time in coming.

Kate - Even some of our more "progressive" friends understand what drives the economy.

Dawn - We definitely need to do something different.

Steve - They'll probably extend the credit in some form.

Malendaz - I agree that there is opportunity; it just doesn't look the same as before.

Jolene - Most of the "stimulus" was focused in the wrong direction. We need good, private sector jobs.

John - Thanks for the re-blog.

Lower taxes is the answer. Create an environment where starting and/or growing a business is incentivized instead of stomped on. The "stimulus" bill was a total scam, dirty old politics in a shiney new suit.

The Govt. is supposed to be "for the people" and the people want to earn. Earners are home buyers. Earners spend money. Spending stimulates the economy which creates more jobs/earners. And around and around it goes..

Taxing small business and Corporations to death is the plan. It's going to be another year or two before the plan shows itslf as the singular reason things are getting worse instead of better. Folks need to wake up and smell the coffee and get a grip on who's REALLY going to pay for the higher tax on Business/Corporations. (Hint: it's you and me) This is a neat little way to get every consumer to shoulder the burden of higher taxes. (no...no tax hike for you... WANNA BET?)

If the Fed spent all the stimulus money on buying every bad mortgage instead of building dog parks in Chula Vista CA., things would turn around at a much quicker rate. At least they'd have a chance of a return. (ROI on a dog park that didn't create one new job?) It might even turn out to be a "profit by accident" situation.

It's easy to be pessimistic when the situation is pessimistic. Unfortunately the 17% or so current actual unemployed are going to have further impact on the viability of even more real estate related businesses, jobs and people.

Hi John, Some area of the country will do better than others. Those focused on 2nd homes or investment homes will do better than traditional markets. Jobs will drive the overall market.

Hi John, I agree with you that we are in for a long, slow, painful recovery. But I disagree with those who say that these government stimulus plans are ineffectual. The Cash for Clunkers was a success. And yes the automakers are suffering a hangover from it, but there numbers in September were no worse than they were before the Clunkers program took affect. However, it did give those dealerships a temporary shot in the arm that may have prevented several of them from closing up shop.

My argument is that in times like these the Government HAS to step in. The market itself cannot handle it. Just look at how the housing, automotive, retail markets are now. Now imagine that we DIDN'T have the $8,000 tax credit or the Cash for Clunkers program, or the stimulus package (which hasn't taken full effect yet, only 14% of the allocated money has been sent). I think things would be even worse.

It's just like those who rail against the evironmentalists and the E.P.A. Imagine what a terrible, polluted world it would be if we didn't have these government agencies in place. It wasn't long ago that a river in Cleveland actually caught fire!

So before everyone points fingers at the government I think we need to step back and look at all the GOOD things government DOES provide.

Thanks for the post and best of luck to you.

Something else that's scary is that the only growth in the job market seems to be government jobs - which means our taxes are paying their wages.

How many private sector taxpayers does it take to support one government worker? Too many. And, with the exception of those on construction crews, those government workers don't produce a darn thing except more paperwork!

The trouble with the current administration - and all of its sheep - is that they don't think. We know they didn't read the stimulus package, so obviously didn't think about that. But since all parts of the economy are entertwined, they should have been stopping to think about cause and effect.

No surprise that after Cash for Clunkers the auto manufacturers are now reporting hard times again - with a drop in sales in the 40-50% range for September.

For every action there is a reaction. Wish they'd figure that out in Washington.

Hello John, Hello All-

It's all about JOBS! In the evolution of communities, first jobs are produced that manufacture more "widgets" than the local community can consume. As more "widgets" are exported, workers begin to move to the area because of the jobs! Houses and apartments fill the need for these new comers, then Retail stores and shopping centers as well as Office buildings and complexes follow to support the newly arrived home buyers/workers. Finally, Industrial centers are established to warehouse products to feed communities. With higher unemployment, the process works adversly to established communities.

Trying to "jump start" our economy with short term incentives like the First Time Buyer Tax Credit or Cash for Clunkers is useless- it's like establishing a new business contact and never following up! Only long term sustainable jobs will establish Economic Confidence. Until then, consumers will wonder- what happens when the money for this program runs out?

As a commercial only broker, I watch the business market closely for signs of recovery. Recent stock market euphoria is positive and uplifting- but we will need consumers to buy with confidence into the future. The only way to establish Economic Confidence is with long term sustainable jobs.

In California, a legislative moratorium prevents the true number of foreclosures to hit the market- that is called a legislative barrier to the law of supply and demand. There is good and bad to this moratorium; the good- housing prices are holding value better than if all foreclosures were released at once. The bad- this could go on for 10 years or more.

Thanks for starting this discussion on unemployment and the effects on Real Estate. Read more about the commercial side of real estate in my blogs on active rain. Continued Success, Pete

Excellent post, the unemployment affect is a bigger issue than anyone wants to admit when it comes to housing, it will get worse before it gets any better

Everyone has opinion but mine is the only one that is correct :) Here's the proper perspective. We are currently in a state of uncertainty. When uncertainty exists in our economy, businesses "retract" and "pull back". They do not expand, grow or hire. NOTE: Over 90% of Americans are employed by Small Business. And presently Small Business is trembling in fear as to what future will be like under the current administration.

Why has there has been little or no attention given to small business relative to all the focus given the Automobile, Insurance and Health care industry? Too big to fail???

Small business is the key to getting us out of this mess! Small business must be set free to create, compete and pursue new heights. Sounds like capitalism doesn't it?

Think what would happen if Small Business was given a greater ability to acquire funding and offered tax incentives for expansion and hiring.

I believe in America and our ability to endure and unlike some of the "doom and gloomers" we will return to strong growth and yes maybe even a boom. But it won't come until we have leadership that understands what really drives this country. Good times will return when Small Business is stimulated and encouraged to thrive. Clear up the uncertainty, put Small Business as priority one and recovery will be quick to follow.

Darn, JP just beat me to it. And I'm not just talking about having the only correct opinion either. :o It is the entrepreneurs who will observe niches for profit potential and create a small business of one, or as many as they need to maximize their returns and remain within their comfort level. It was ever this way. Hence, it is important to minimize taxes on small businesses.

Good post Robert!!! It's hard to believe what a profound affect these decisions (or lack of) are really having on us.

And the story not being told in the unemployment numbers is all of the "Underemployed" (cut in hours, taking lower paying jobs.)

Just look at what real estate agents, loan officers, builders, etc.. etc.. now make compared to 2005 for an understanding of this..

We need to let the market be a market and naturally correct before we ever get back to something somewhat normal. Current programs are only delaying the inevitable and burying the country in debt.

Here is another article on the current state of the FHA for you by the way...

http://online.wsj.com/article/SB10001424052970204488304574428970233151130.html

There is only one investor purchasing mortgage backed securities right now... the Fed at the cost of around 1.45 Trillion. Not many people are talking about that...

We are just jumping from one frying pan to another....

Short sales are here to stay for many years to come due to the loss in home values across the country. Hopefully lenders will be able to learn as they go to get the decision making tiime down to weeks instead of months. Most home owners are still employed, paying their mortgage and riding this out as best they can; however, someday they may wish to upsize due to an expanding family or downsize because of an empty nest. Not a hardship, but a natural movement in a healthy housing market. If these home owners can't move, the market is in for a very long, slow recovery that no stimulus plan will accelerate!

Great post. If we can just accept that home prices need to decline to levels that are actually supported based on peoples' incomes, and not easy to access debt, then the real estate market will return to a truly healthy state.

The one mantra that I keep hearing from politicians and REALTOR (and related) groups is that "we need to get the housing market going again so it can drive the economy". When I hear that I want to vomit. My background is in economics with a BA from the University of Pennsylvania. I can assure these folks that real estate has never driven the economy over any extended period of time. Over short periods it has, but those were usually followed bu bursting bubbles. The reason is that inflated asset prices that artificially encourage people to buy and builders to build ultimately flop when people cannot afford to pay for the homes or business conditions do not allow businesses to pay for the inflated commercial real estate prices. The answer always goes back to what you are saying. This is a jobs problem and debt problem, not a real estate problem. The government needs to stop the tax credits, the bank bailouts and the FHA propping up and just let the real estate market fall and banks fail. After that is over all the foreclosures can be liquidated and the market can hit bottom where people can afford the prices. Now that the government has stopped wasting its time on real estate it can focus on the root causes of this problem: banking policies and too many anti-business laws in America. Fix those and this credit bubble won't happen again and businesses will start hiring again.

John I tend to agree with the comment left (no name give except ReMax 2000) that there will be another bubble. Here in the Greater Toronto Area of Canada we suffered fall out in the housing market from the financial crisis created by the USA but our market began to return this past spring and prices are back to what they were before the crisis and often higher. There is a deminished number of listings as people are reluctant to make moves given the current US situation and this is partially responsible for keeping prices up but buyers are taking advantage of low interest rates and still buying homes here in the GTA. Donna Webber, Broker, ArcRealty Inc.

The Bush Tax Cuts Expire Next Year. This is going to further tank the economy. I like the First Time Buyer Credit as it shuffles some money to middle class tax payers, but what we really need it a major cut in taxes for all segments of Tax Payers, Corporate all the way down the line. If we can then get some physical responsibility and stop Porkulus before most of it is spent the economic boom of the tax cuts will pay for themselves.

The long awaited payback has decended upon us. If only we'd had just let nature take it's natural course, (no bailouts) we'd probably be a lot further down the road to recovery by now.

John...they can manipulate the supply and demand by holding the REO off the market and stabilize prices for a short time...they will the release the supply in bits and pieces and prices will drop again..what a shell game..this is going to be a slippery slope for quite some time!

Pete - Sounds as if you have a grasp on the program.

Dave - I agree.

Bill - Exactly. Some markets are hardly suffering at all, but the overall market will continue to suffer and will recover very slowly.

Jerry - Auto sales just tied the worst sales month on record. I don't really see that as a success. And my problem with the government is the billions wasted through mismanagement, corruption, and ill advised programs.

I think the year long rise in the stock market is a Fed prop. It's being propped up to give the illusion of well being and to grease the way for all the new policy being proposed. I admit this isn't an original thought and that I subscribe to this view after listening to the financial advisers from Street Talk Advisers here in Houston. Their web site is www.streettalklive.com and here is an excerpt from one of their news letters on the subject.

'So Who's Buying This Rally?

Well, I thought you'd never ask! Suffice it to say that since the launch of the Fed's Quantitative Easing, aka Monetization program, the value of the Total Securities Held Outright on the Fed's Balance Sheet has increased by $917 Billion - from $584 billion to $1.5 trillion. . . consisting in part of Securities held outright: $1,533 billion . . .'

The normal indicators of a healthy market just aren't there, declining unemployment being a big one.

Marte - I don't expect rational action from our "leaders."

Pete - I've also studied the declines in commercial real estate; that problem combined with all the others in which we're mired, negates any reasonable recovery.

Jason - Thanks for your comments--I agree.

J.P. - As entrepreneurs we all recognize the value of small business, but I can't see the current administration doing anything to help small business grow. Until that attitude changes, the economy will struggle. We can give more billions to businesses "too big to fail" and it won't stimulate a recovery.

Robert - Don't count on any tax relief for small business anytime soon.

Paul - And when we jump from the frying pan we'll probably just get burned.

Steven - Yes, a long and disappointingly slow recovery.

James - While your comment sounds very logical and well-considered, that's not the reaction I have come to expect from DC.

Donna - If the government can stimulate another bubble they'll be happy, for their problems will once again be passed onto the future.

Gene - If we can then get some physical responsibility and stop Porkulus before most of it is spent the economic boom of the tax cuts will pay for themselves. That's a pretty big if. Don't know if I can expect DC to follow through.

John & Janis - We certainly can't step backwards to see what might have happened. The big question is: Can govt. learn to act responsibly?

John & Lisa - They will manipulate the market as much as possible which will impact the market for years.

Jerri - Yes the govt. is definitely manipulating the markets. It's the only logical explanation.

The government has shown no interest in stabilizing the economy (i.e. stopping by mandate unnecessary foreclosures, stimlualtin the largest employment sector, small businesses, or frankly addressing the coming crisis in commercial loan defaults). Instead, the administration is focused on centralizing power and control. The solutions to our economic problems are quite simple. What we need is a change in government and policy.

I am assuming that everyone on this board was born well after the first Great Depression. However, we all should have studied it in High School and maybe in economics classes in college. This one feels very much the same to me, only without the soup lines (although those may be coming as unemployment continues).

Government intervention in the way of the alphabet programs did not help get the US out of that depression and they won't help this time either. We are looking at rampant inflation that will inevitably come due to all the money being printed in order pay for the tax credits, FHA buyouts and bailouts.

The Great Depression lasted effectively until almost WWII. I know different areas and sectors started recovering prior to that, but the majority of the people did not recover completely and our current consumer driven economy didn't start until all the GIs came home after WWII.

Houses will still be bought and sold, just as they were then. Some markets will be better or worse than others. We can't have rose colored glasses on, but we can do our job and provide good service to those who are in a position to either buy or sell.

I am more concerned with the idea that banks want to sell real estate directly as well as finance mortgages. To me, this is a direct conflict of interest.

As far as small business growth goes, as real estate agents we are in a perfect position to promote the smaller mom and pop stores, businesses and services in our own communities. We blog locally, send newsletters and emails to our clients. What better information besides the local real estate market then to spotlight those unusual stores, that special dessert/coffee shop or local pet groomer or nail shop to add to those outlets? Even the local used bookstore can use extra publicity. I think we can definitely help our own local economies that way.

I guess I like to find solutions, even if they are local and very small....

Unemployment in Michigan is nearly double that of the national average. That's is not including those whose benefits have ran out, and the underemployed and those of us who don't qualify even though we are no longer working. You don't need a Harvard education to realize they need to quit trying to recreate the wheel. Get back to basics, cut taxes, help small business and job growth has to happen first.

forget health care reform
forget cap and trade
forget the 2012 Olympics

These things need to dealt with after we get our financial house in order and get this country working again.

Your prediction is sobering and might be the truth. I work with a lot of investors so we've had some pretty nice times. I'm in the Denver, CO market. It's one of the best markets there is right now. STABLE to slight growth. That's the new double digit appreciation.

Great post. It just makes sense if the rate of unemployment continues to rise fewer and fewer people will be able to buy homes. We will know the economy is turning around when companies start hiring. There is no recovery without lower unemployment figures.

But we can forget about that as long as the government keeps sucking money out of the private sector and seizing companies, setting salary caps.

Ifwe are facing having only the Bank of America, Citi, Wells Fargo and J.P. Morgan Chase as the lenders of choice along with FHA and VA loans while Fannie and Freddie to dominate the securitization of mortgages, the housing market will be in real trouble. Limited choice to the borrower allows the interest rates to be set by the banks, and you can certain that will not bode well for the borrower or the housing market.

It's really time to put government back in the box before they truly kill the "golden goose" of the economy - the housing industry.

OCT

Look at the Flip Side- How has the housing market effected Unemployment?

I have been working with new home builders in Charlotte NC for years. I have seen hundreds if not thousands of jobs lost for not only employees of the home builders but also the trickle down to all the subcontractors.

As a real estate professional, you can have a personal effect on your local economy and help put people back to work in your area.

Each new home built equates to about 2.5 jobs/year. Don't get stuck in the rutt of only showing used homes, at least expose your buyers to new construction.

Charlotte NC Homes for Sale

James - And there is not yet enough support to force change. We'll see what happens as the economy continues to struggle.

Barbara - Good points. I agree that we can certainly help on a local level, and that there will be plenty of business for those creative and hard working individuals who can seek out and recognize the opportunities.

Cecilia - But we first have to get the message to those in power. They're still stuck in the past.

Mike - My concerns are for the overall economy. Those working in areas less impacted by the recession are fortunate indeed.

Patti - But forcing government back into the box will require a major cooperative effort from the people; and it doesn't yet appear that we're ready to cooperate.

Eric - There are lots of opportunities for us as individuals to help; we just need to commit and understand that we can make a difference.

What most will not admit is that the housing boom SHOULD NEVER return. It was based on incorrect connditions. If it were ever to return, it would mean we are making the same mistakes again. If only we as a people and as a nation can learn from our mistakes and not try to, as Einstein pointed out "solve the significant problems of our day using the same level of thinking we used when we created them..."

May - And that's what concerns me most. Many in both the government and private sector will try to create the boom once more.

The bellyache is seeing former clients try to cope with keeping their homes after being laid off.

Then, there are the huge percentage of homeowners who fear being 'next' in the layoff trap.

We need some smart people in Washington and in the finance world that think 'people', not 'profits'.

Robert - We need some smart people in Washington and in the finance world that think 'people', not 'profits' That would be a great start, but we don't have them yet.

John, very well stated. It is the unemployment, additional loan requirements, additional loan regulations and the fact the lenders who sell foreclosures are actually MAKING MONEY FROM THE GOVERNMENT on thier transactions. The fuel that got us into this present mess is still very much out there and that fuel is---GREED!

Steve - And the government is helping neither homeowners nor small business people.

Dear John: Many of your contributors seem to want the banks or the Government to save the real estate industry. All the Government would have to do is send evey struggling homeowner the money to pay their house payments.

With regard to foreclosures and short sales, many times the banks don't even have the legal right to negotiate the balance of a loan they are collecting, essentially, they don't know who to ask. Some group of investors somewhere else in the world may own various bits and parts of the loan they are servicing. Another reason the banks seem so standoffish about short sales is that they aren't doing business by the rules of the "real world". They aren't experiencing any financial pain. The Government has poured so much money into them that they have no "need" to accept a "fair market value" offer for the security they hold on the property. Until the banks actually run out of resources, and can find no one to fund their business any longer, they won't have to face the truth about the value of a particular home.

It could turn out that the prices people are currently paying for "great deals" on homes may be way too high as the market continues to deteriorate and foreclosures pour into the market in 2010 and 2011. Possibly, the Government can keep fronting the money. The foreclosures may go on for quite some time because it doesn't take long for a 5% down FHA loan to turn into an REO in this down trending market. But, one thing IS sure, the Government has NOT sent any money to my friends and clients who lost their jobs and then their homes in the past two years. Tom Waite, Real Estate Broker in Oranage County CA.

Tom - I think most realize that government interference only worsens the situation, and until we can begin creating jobs, housing will flounder, regardless of government action.

John, I understand all the comments and concerns about about housing, jobless rates, taxes, etc. ....

but I keep going back to the fact (which somebody already pointed out) that housing is always LOCAL.

If each us of Realtors can keep focused on helping our LOCAL real estate markets (for me that would be St. Paul and Minneapols houses), then I think we can REALLY make an impact.

All we can do is all we can do - we should try doing that.

OCT

Very true. The stimulus can only help so much with high unemployment.

Sean - Yes, all we can do is all we can do, but if we ignore national conditions and trends, we may suffer.

Mark - Thanks for stopping by.

We can walk thru life with the rose colored glasses or face the reality. John, you are absolutely correct, until unemployment goes down and this throwing money to band-aid problems end, the situatiuon will get worse. The numbers show that those who entered home ownership with gift programs have some of the highest FHA foreclosure rates, so what does the Government do offer tax credits to use as down payment, wait, that is what help start this mess. I fortunetly am in the final phase of my mortgage career closing my Last loans at the end of the month. Doing primarily FHA 3% and 20% conventional loans, I can end my career with happy thoughts. Good luck to those who have 10 years or so to wait it out.l

As a nation, we need to re-set our value system somewhat too. Decades ago, it was enough to just buy your first home. Somewhere, folks have gotten the idea that they also have to have each and every room furnished with the latest designer decor and two new cars in the driveway. I'm happy to see that some of the first-time buyers I'm working with are being realistic about their finances. Many have been renters with the salaries to support the payments, now that the home prices have dropped. Previously, they couldn't even consider home ownership.

John

I always love reading your blogs as they are very insightful and accurate.

We have come to a time in which we are realizing the negative impact to our economy from areas such as declining industrial production, the mortagage market nightmare, unemployment and a littany more. It is time for our Pol's to once and for all look to resolve our economic mess or we are going to suffer for many years to come. This country is getting very top heavy as we speak.

The people of this country have seemingly lost their voice to PACS and Lobbyists ~ do you think that we will ever see a public funded election process in the USA. I do not and I point to this as major problem area.

NW - These are interesting times. I just posted on a related topic.

Karen - Restoring a bit of "reality" is a good thing.

Brad - I agree that big business and the lobbyists now seem to exercise far too much control.

That is why it is important to invest in markets with lower unemployment rates! Yes, there are still some still out there! Indianapolis isn't bad, Texas is pretty good, etc.

Jason - You're right about still having some areas with low unemployment. Hopefully more areas can join that select group.

John,

THis is a great article and the public needs to be informed that we are headed for a W shaped recession with more foreclosures on the way. I live in a affluent communtiy and from what I am observing with some parents at school they are clueless that we are in financial depression in this country and it is only going to get worse with this current administration.

I am consumed by liberals who don't understand what this administratio is burying us and our children with in a wasted stimulus package that has sank our taxpayers debt to an all time high.

I say vote them out in 2010 and this country needs to clean up and start fresh...Hang on we are in for a bumpy ride but God will protect his people and he has been blessing me!

OCT

I've been saying this for a year! Of course JOBS are the key to restoring our economy! Can't believe ANYONE would think otherwise. Tax credits, cash for clunkers and all the other gimmicks won't change much for the majority. Kind of reminds me of that "no tax on gasoline for the summer" proposal the Republicans touted last year -- How absurd!

Buying a home is all about creating stability -- something no one feels they have if they don't have a job. Same mentality.

And JOBS require:

--- in the short term, the reinvigoration of a manufacturing base -- which means tax credits for manufacturing companies large and small who employ Americans and NO credits for those who manufacture overseas. What the he__ are we doing giving money to so-called American companies who manufacture somewhere else? Are we stupid or what?

--- in the longer term, investment and change in our education system (the KIPP method seems to be very successful).

Finally, we need to be our brother's keeper; as Realtor's we have a lot of infliuence on 1st time buyers (who, after all, are the movers and shakers in our industry). We can be greedy and steer them to the home that's too expensive for their budgest, or we can do our job with our conscience alive and well by steering them to a smaller, more affordable home.

One more thing: There's no place here for bashing one political party over another. Our politicians of both parties have a lot to answer for in their greedy quest for power. By and large they seem disconnected from us ... but that's for another blog.

OCT

Mary - Term limits is the way to start.

Tressa - You're right about the political disconnect; neither side seems to grasp the problem. As I see it, a jobless recovery is NO RECOVERY.

OCT

All these dredits and programs are band-aids. We need jobs for a full recovery!

OCT

Wayne - Jobs are key!

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