Mounting evidence shows the supposed housing market recovery is just an illusion, according to housing and mortgage industry veteran Lynn Effinger, executive vice president of field services company ZVN Properties.
Although some statistics may indicate improvement, more and more figures suggest another housing downturn is approaching,
warns Effinger in an article for MortgageOrb, an online mortgage industry publication.
"And without solid proof that the housing sector is truly healthy — and until there is meaningful creation of well-paying, full-time jobs — the 'recovery' is illusory at best."
A growing number of housing market experts agree housing is faltering, but their views are rarely heard outside the housing industry, he notes.
Those front-line real estate professionals realize that the economy in general and housing in particular are weaker than the media and special interest groups maintain. Many warn that the low workforce participation rate and lack of wage growth means another housing downturn is on the horizon, Effinger explains.
The official unemployment rate underestimates employment because it does not count the nearly 8 million part-time workers who want full-time work but can't find it. Plus, a huge number of unemployed workers are not counted because they have given up looking for work.
Considering those factors, the unemployment rate is closer to 10 percent or higher, he says.
Effinger cites other reasons why the housing recovery is an illusion, including a large "shadow inventory" of properties that have been foreclosed on but not put on the market, a high foreclosure backlog in states with judicial foreclosure processes and fewer first-time homebuyers due to tight lending standards.
Plus, institutional investors, who supported rising home prices by buying foreclosures and turning them into rentals, are backing away from the market, he asserts. "But now, some of these institutional investors are selling off some of their portfolios because their business model was flawed insofar as they didn't adequately take into consideration decreasing home values/prices and rising vacancy rates."
The latest
National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), fell 5 points to 54, a three-month low, indicated declining optimism about housing.
"While there was a dip this month, builders are still positive about the housing market," says NAHB Chief Economist David Crowe. "After the HMI posted a nine-year high in September, it's not surprising to see the number drop in October."
All three HMI components declined in October. The index gauging current sales conditions decreased 6 points to 57, the index on expectations for future sales slipped 3 points to 64, and the index for traffic of prospective buyers dropped 6 points to 41. A number higher than 50 means more builders view conditions as good than poor.
© 2023 Newsmax Finance. All rights reserved.