In Our View: What to Believe?
Is housing market improving, or heading for another fall? Conflicting reports confuse
Monday, July 18, 2011
There is a drawback to the Age of Information. Namely, that there often is too much of it.
Too much information. Too many conflicting reports. Too many contradictory opinions that leave you with no idea of what to believe.
Such was the case last week. On one hand, there was a report from California-based RealtyTrac Inc., which declared that the number of homes in some stage of foreclosure has dropped across the nation, across the state of Washington, and across Clark County.
This is, unequivocally, good news. In Clark County, according to the report, 248 homes were in foreclosure in June — a decline from 348 in June 2010 and from 500 in June 2009.
As Mike Lamb of Windermere/Stellar Group in Vancouver told reporter Cami Joner of The Columbian: “This kind of a situation has a life span like a cold or the flu and it has to run its course. We got the cold a lot sooner than other people, so it’s predictable that we should be seeing the light at the end of the tunnel by now.”
We hope so. Foreclosures are a terrible burden on the homeowners involved, but they also adversely impact home prices throughout the community, serving as an indicator of a depressed local economy.
As Windermere’s Scott Anthony said: “I do see we’re on the low level of the plateau. Certainly by mid next year, we should start seeing some increase in values.”
With rising home values serving as one of the most important harbingers of a solid financial foundation, it is safe to say that other facets of the economy will not improve until those values return to a healthy level of increase. Not the bubblelike increase of the past decade, the kind that had couples sleeping in their cars in order to get first crack at new housing, but a smooth and steady increase.
That, however, is not going to happen anytime soon, according to at least one analyst.
At the same time that RealtyTrac was releasing its foreclosure report, financial analyst Gary Shilling was telling Yahoo! Finance that a double-dip recession is on the way by the end of the year. According to Shilling, the housing market remains saturated, and that will result in home values falling by as much as 20 percent.
As with any commodity, home prices are a function of supply and demand. And the government-created housing bubble of the past decade resulted in excess inventory, which Shilling says will take four to five years to burn off.
Somewhere through all of that, your head likely started to spin. The market for financial analysts might be the only market that’s more saturated than housing, and you can find any number of experts who suggest that housing prices will rise, or that they will fall, or that we’ll all be living in tents by the year 2020.
The conclusion? Nobody knows what is going to happen with the economy or housing prices or the unemployment rate between now and the end of the year. Economies can be fickle.
Yet, there are lessons to be learned. The economic collapse of recent years, according to people who understand such things, was fueled largely because homebuying became too easy. Banks, spurred by incentives from the federal government, were too eager to hand out questionable loans, flooding the market with buyers and creating artificial price increases. Consumers, armed with those easy loans, were too eager to spend money they could ill-afford to spend.
As a nation, we’re still paying the price for that feeding frenzy. There is hope that a decline in foreclosures is an indicator that the market is correcting itself and that a newfound financial conscience has taken root. But sometimes it’s difficult to know what to believe.