Don't Be Fooled By May Housing Statistics

Reading tea leaves is an art, not a science, so those who are trying to say that a housing recovery is already well on its way are once again doing a song and dance with shadows, wires and mirrors. I remember hearing the same story just a few years ago as mortgage companies folded and it became almost impossible to qualify for a purchase loan or credit line. The pundits said, "don't worry, be happy, everything is fine - buy, buy, buy!" But it was already too late. Easy mortgage qualifying was already gone and the lack of qualified buyers had already sparked a sharp downward trend in home values. Still the "industry leaders" urged agents to get out there and tell buyers to keep making outlandish offers and sellers to hold tight to values that had long since vanished. Like the brave cavalry of The Light Brigade, agents charged the guns, taking with them to financial purgatory those whom they were charged to protect.

Those same generals who gave the orders that led to the career suicides of so many fine agents and to the foreclosures and short sales of so many trusting homeowners are now saying that rising prices alone will carry the water for a housing recovery. I say... balderdash. They have an upside down view of the market. The only thing that can sustain a steady, meaningful recovery is a sufficient flow of qualified buyers into the home-buying market. While prices are skyrocketing in portions of Silicon Valley and other selected markets, overall there are still not enough qualified buyers to sustain long term improvements in the general market.

What primary factors will contribute most to growth in the buyer population?
1) Increases in private sector employment
2) Return of private money to mortgage lending.
Until these influences show positive signs of life, the housing market will continue to be strong in pockets and will languish overall. Don't be fooled by the pundants who say "don't worry, be happy." Look at your market data and figure it out for yourself.