The housing market has built begun to build strength, but it is nowhere near what we would call a “strong” market. There has been too much uncertainty injected into the development and building side of the market for investors to be comfortable. So, they are likely to limit their project. That in and of itself is not a bad thing. Low new build volume equates for a modest support in pricing.
We’ve come to a point where labels and sound bites are “the news” that we consume. The problem with bits of information like these is we miss the story on how we are affected at a personal level. In the political world we group individual by ideology as opposed to results or actions.
For instance, I know many “liberals” who are responsible, I know “conservatives” who are irresponsible, and of course I know many who don’t claim to be any particular ideology but who are erratic in their level of responsibility.
For example, the “pool” of potential home buyers has gradually shrunk over the last several years. Setting aside the folks who have suffered through job loss, foreclosure and short sale, I’m talking about the currently qualified pool of home buyers. Household income for this segment has declined by $4,000 over the last 5-years. In simple dollars that means the average home buyer can now afford a house payment of about $333.00 a month less than they could have in 2008.
Add to this reduction in take home income the real cost of living increase, gasoline alone has increased by 112%; and the cost of goods sold has increased to cover the added cost of energy to produce and ship goods. This also acts as a drain on the ability of a home buyer to obtain a mortgage, adding as much as another $400.00 per month to the decline in available funds to make the house payment.
With no substantive domestic energy policy – that benefits Americans – in sight, and the irresponsible spending of government at the Federal level, home owners will see further decline in their ability to sell their homes in the coming months and years. The lack of a Federal budget is absolutely inexcusable. Families, local and state governments have to balance their budgets. So why does Congress think they don’t have to? That is the definition of irresponsible.
And how many people are out of the home buyer position because they are unemployed or have been unemployed for a record stretch of time. Unemployment of 8% draws millions of people out of the home buyer pool.
What will save the housing industry? Not convoluted mortgage qualification schemes guaranteed by the FHA -a government entity- and not the printing of more money. The base of our economy is at risk and it will take a comprehensive free market effort where all of the stakeholders work for a common goal. Energy, Finance, Production, Consumption; all must have some level of risk and investment to make it work.
Irresponsible spending left unchecked will be the demise of the housing industry. Calvin Coolidge had it right when he said, “You can tax your way out of poverty and more than an alcoholic can drink his way to sobriety.
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