As reported in the November 30th, 2010 CNNMoney article written by Les Christie, home prices fell by 2% during the third quarter of 2010. S&P Case-Shiller U.S. National Home Price Index uses a composite of single-family homes from nine U.S. Census divisions, which are calculated quarterly. Housing is a strong indicator to future economic performance because it drives more economic activity. When a family buys a home, it typically leads to more buying. This includes furniture, appliances, kitchen items, along with other household goods. That impacts a number of industries and leads to higher economic growth. However, this downward trend suggests that our immediate future remains cloudy as a sluggish labor market and an uncertain foreclosure market are drags on housing.
The unemployment rate remains high, so naturally individuals are cautious in buying big ticket items. The U.S. unemployment rate remains very high at 9.6% as of October. Then one look at the Economic Policy Institute report on the current labor market and the outlook is particularly dire. As they suggest, it might take 20 years for us to see unemployment rates near our normal rate of 5%, unless job growth increases substantially. When the labor market is sluggish, people are less secure and therefore less willing to make a significant financial commitment on a new house.
Foreclosure markets will need to operate more smoothly before we can see improvement. There appears to have been questionable practices from banks that may not have followed proper procedures. Another viewpoint offered here in this November 29th, 2010 Housing Wire article from Paul Jackson blames the mortgage servicing industry and governmental efforts in creating more affordable housing. Regardless, litigation risk is on the rise and this will have a negative effect on the housing market.
No comments:
Post a Comment