While there have been a substantial number of positive predictions on the housing market, with many commentators saying the bottom is in, Christopher Whalen of the Institutional Risk Analyst presents a less optimistic viewpoint of the housing market and recovery in a recent article entitled, "Reality Check: Is the US Housing Market Really Recovering?"
He writes, "One of the more amusing and even troubling developments in recent weeks is the general consensus that the housing market is recovering. Whether you are a consumer, a media maven or merely a lowly investor, the common view now seems to be that housing is getting ready to bounce back to 2005 levels. Would that it was true."
His viewpoint on why this will not be the case is as follows:
- a reduced number of possible home buyers, who can afford to buy and actually live in a home (predicts a decline of 10-15% in number of available home buyers)
- private equity investors have been purchasing excess housing inventory at the moment, hoping to rent homes.
- available credit to home buyers is scarce. Most buyers need minimum FICO score of 740 to qualify for mortgages, a high bar.
- Non-conforming loan market is largely non-existent.
- Foreclosure backlog will take years to work
- Certain states, among them California, Connecticut, and Massachusetts, are crafting strict "consumer protection" laws that make it difficult, if not impossible, for banks to foreclose. This will discourage private investors from proving non-conforming loans in these states.through. In Northeast, including Massachusetts, the backlog is higher than the national average.
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