Is Relief on the Way for Residential Housing?

 |  Includes: KBE, KME, KRE
by: Wall St. Cheat Sheet

By Carolyn Austin

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The chart above (click to enlarge) sums up nicely the effects of rising unemployment on the housing market. But, despite what the analysis suggests, is relief really on the way?

Investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. We will not get a market capable of sustaining growth until the value of property decreases or income increases to the point where more buyers have more opportunities to purchase.

Let’s look at income (click to enlarge) …

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This chart makes painfully clear that a real recovery in housing, if any, may be years away. As the 2002-2009 column makes obvious, payrolls do not exist to support a housing recovery.

This is the reason it makes sense to have all the programs to keep homeowners in their homes: not just because it’s better for banks (the bailout party of first resort), but because at current prices there just aren’t enough “qualified” buyers — even with hefty tax credits as incentives.

On a brighter note, homeownership rates have held fairly steady during the last year (click to enlarge) …

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But on the next page, look at the ‘shadow inventory’ of homes ready to morph into home foreclosures in your neighborhood. In fact, according to a recent MBA survey, we can anticipate an “unprecedented wave of mortgage delinquencies and foreclosures” into 2011 …

Until excess inventories burn off, we can expect more price declines into next year — especially with unemployment at high levels. The new government mortgage assistance programs should help to ensure the fallout pattern is more of a wave than a spiral.