Early signs of housing recovery may be premature on clarkhoward.com

CLARKONOMICS: There's a lot of talk about how the market seems to be finding a bottom as values begin to stabilize. But Clark thinks this may just be wishful thinking.

The consumer champ believes the market still needs more time to stabilize for several reasons.

During the bubble, we built between 2 million and 10 million more housing units than our country needed.

In addition, demand for housing has dropped as people who might have bought a home didn't. They've either moved back in with their families or students of college age have moved back home after finishing school.

And looking forward, even though economists may say the recession ended in such-and-such a month of 2009, it doesn't yet bode well for housing because jobs are a lagging indicator of economic recovery.

Yet in the midst of all this caution, there is real opportunity. The housing market remains fantastic for investors; those who want a retirement or second home; those who want to be a landlord and on and on.

We're now at the point where 13% of all mortgages are in default. Of course, not every single one of those will become a foreclosure. But that's still a very high number by historical standards.

Most of the financial distress has migrated from houses that were bought by speculative buyers to owner-occupied homes where people have had hours cut, lost a job or had an ARM that adjusted with a crushing payment.

The opportunity for someone in a position to buy is outstanding. There are a meaningful number of Americans who still have secure jobs, some savings and the stomach to take a risk.

The most promising types of homes Clark has seen are in second-home communities that are 2-3 hours drive from a large metro area. Waterfront property is also hot as well.

What others are saying

$8000 Tax Credit???
We closed on our home February 26 and still have not seen any $8000 credit.
By Brian @ 09/11/09 10:52:38 PMreport abuse
waterfront property
I don't think coastal property is selling that well. There is better awareness now of the higher risks, rising sea levels, higher insurance rates, eroding shorelines, poor water quality, etc.
By Jennifer @ 09/10/09 04:11:50 PMreport abuse
Seeing is Believing...
I believe we should follow our own advices. In the past people would always get blindly optimistic tips on some hot stock or fund from their broker. Many people buy into these tips and the broker get rich on the commisions. Then the stock get crush and people lost their saving. Some people find out later that their broker never had any share in the hot stocks they were selling. And they wonder why. So I say to you, don't start believing until you are seeing with your own eyes. Why buy a house when you know it won't go up much in the next few years and possibly drop lower in value. Just look at what happened with home values in Japan in the last TWENTY YEARS.
By Polly Anna @ 09/03/09 01:05:22 AMreport abuse
Short Sales
I am a Realtor in the Cumming area and am currently trying to prevent a foreclosure from happening. I have had a contract in that is only $1,000 below the banks appraisal. The homeowner has a second mortgage and the current argument is between the 1st mortgage (who is trying to foreclose) and the 2nd mortgage. The 1st will give the 2nd xx amount of money but the 2nd wants more. The catch is the 1st is Merrill Lynch and the 2nd is Bank of America. Bank of America owns Merrill Lynch!! They have both said they will let the homeowner be foreclosed on - all over a $6,000 descrepancy! They have no compassion for the homeowner or the buyer that has been waiting for 3 months to see if they will get this home. It seems to me that we should try to resolve as many of these potential foreclosures as possible to pull ourselves out of this housing crisis- I am so Outraged at these banks!! Can you help Clark?
By Becky @ 09/02/09 04:57:34 PMreport abuse
Dave's Rx for Utopia
Hey Dave, Me and some of my Russian pals tried your prescription about 90 years ago, but we went even farther and actually killed a lot of the rich folk because it's way easier to take their stuff when they're dead. Darn it though the whole thing didn't work out too well. A kindred soul, Pol Pot and his buds tried again in the 1970s. Nope, nada, nyet, millions dead but still no classless Utopia.

But I'm sure THIS time will be different, so you go girl!
By Ghost of Lenin @ 08/26/09 12:56:38 PMreport abuse
Dear Medical Student
You, as future generations, are having to pay for the sins of your fathers. That is why you are paying $6000.00 for a property you paid only $165,000.
By Cindy @ 08/26/09 07:42:59 AMreport abuse
Saturated market
Ummmm, the rental market is saturated. Rent is low and you can negotiate hard if you're a good tenant. Don't forget about all those condos that turned into apartments!
By Medical Student @ 08/25/09 11:03:59 PMreport abuse
I'd vote for you!
Dave! I'd vote for you but I can't afford the gas to get to the polling place! Guess I could mail it in but I still can't afford the gas! I like your idea of having the gov'nt paying for my internet use! Good idea.
By macattack @ 08/25/09 06:49:58 PMreport abuse
be a landlord
All the people with money should buy these bargain homes, and rent them out. it would help the banks and the housing market out. It would help out all the recently disposed homeowners by giving them a way to have a roof over their head that their current salaries can afford. (with no hard to understand interest payments..heh heh) It would also set the economic classes more like Mexico...where the rich get great interest off the poor and the poor have no choice but to rent or lease everything, forever. There is no middle class, no way to overcome the huge interest rates in order to own. The local VW dealship in Cancun gets 40% interest on secured car loans. the rich get richer, and the poor stay that way. It could be the same way here...so while you still have a job: withdraw that 401k, sell some stocks you know are going to tank again, and buy a house to rent to the new class of poor!! if you have 4 or more they will keep you rich, while the poor will stay that way through the second part of this depression as government spending wipes out the value of the dollar and inflation takes hold...then to cement the class divide we could have a republican president and congress come in after obama and viva la 2 class system.....or we can go the other way, and use the rich to pay for the mistakes of the poor, creating one big middle class nation. government subsidized by huge taxes on everyone (expecially the rich) providing free health care, schools, affordable housing and cars, social security, and while they're at it: free internet, cellphones and cable tv with movie channels for the middle class masses.
By Dave @ 08/25/09 05:35:18 PMreport abuse
Call it a depression!
Since summer of 2007 I've been calling it a Depression. I've never been out of work! Today my brother faces foreclosure on a home 2-3 hours from SF, CA. I've talked to people and over heard people in the CA foothills that they just lost a job, their is no work, the County just canceled my contract. Called my firewood supplier and two phone numbers down he had been disconnected. Still see him in town once in while. Oh, my wifes wealthy Uncle is buying foreclosed homes and sitting on them. Now we barely get buy but our rent is low and I do all repairs to keep it that way. Just went out this AM before it got to hot and repaired the well. Racoon broke our 1/4" water line to the cooler while we were out of town and ran our well dry and heated up the pump which caused more leaks at the well. Muddy racoon tracks are easy to tell and they were right there on the wall by the broken water line. How depressing. LOL
By Mark Hillyard @ 08/25/09 03:46:16 PMreport abuse
It's Not Over Until The Fat Lady Sings
And she won't be signing for a very, very longtime. No Jobs=No Recovery

My property taxes and tuition went up, but my homes value, wages and hope this country will ever recover from all this corruption has been plummeting. And to top that off 25% of my net income goes to health premiums, I will be dropping it next month, sure hope I don't get sick. Maybe I should go to the Clark forums to rant, sorry. lol
By Chris @ 08/25/09 03:04:41 PMreport abuse
agree with ed t
Ed hit the nail on the head. Eventually these hidden bad mortgages will have to be exposed on the banks financials and when they are, look out. Then you may see the real bottom. Thats when prices may finally come into line with what people can really afford. Most housing is still way overpriced.
By mjd @ 08/25/09 02:22:48 PMreport abuse
Agree with Ed T: The Next Wave
From what news I have seen, it appears that the initial foreclosures were mostly due to adjustable rate mortgages. First time buyers were easy prey; they did not understand the fine print. Perhaps some just did not try to understand as well. To an extent, it also happened with people who did not understand that they were in an interest-only payment plan for x number of years, which reset to higher payments.

The next wave of foreclosures has only begun. These are the buyers who had golden credit scores, good steady employment history, and the wisdom to choose a fixed-rate mortage. Thanks to the first wave of foreclosures, the domino effect has caused them to lose their jobs and, as to be expected, those golden credit scores.
By Chiliheadwizard @ 08/25/09 02:15:46 PMreport abuse
housing market
Isn't the recent housing activity just due to the artifical incentive provided by the government---the $8000 tax credit? If so it really isn't market driven and a "real bottom".
By ann @ 08/25/09 01:15:17 PMreport abuse
This dance is just starting
The banks have millions of bad mortgages hidden on their books. These loans are non-performing, but they won't initiate foreclosure because it would expose the bank as insolvent. One day these houses will have to go on the auction block, and when that happens, look out below! Anyone who thinks house prices have bottomed is crazy. And don't even get me started on commercial real estate...
By Ed T @ 08/25/09 01:06:07 PMreport abuse
Taxes!
I'm a fairly liberal person, but I live in a locale where the property taxes are simply outrageous. The houses near me are affordable, but anywhere from 33%-50% of your monthly payment is going to taxes. Why should I have to pay over $6000/year on a house I paid $165,000 for? The roads are falling apart, the schools are the pits, and police give out speeding tickets left and right without fighting crime. Cleveland doesn't rock as Drew Carey would have you believe. It sucks!
By Medical Student @ 08/25/09 12:03:53 PMreport abuse
Happiness and Success for the Bears
There seem to be a lot of assumptions built into this article. "Buy when there's blood in the streets" seems like a good idea at first blush, but remember, tomorrow there may be more blood in the streets, and some of it may be yours.
In the end, as always, it will be discovered that there were few who had the resources and psychology to have bought at the bottom.
Me? I'm not buying yet, I'm hunkering down for the next down-leg.
_aleph_
By _aleph_ @ 08/25/09 11:51:36 AMreport abuse
Because of fairly stagnant wages over the last several years, even after the steep drop in prices over the last year, it is still too expensive for most who want a home to be able to afford one. I still think prices need to drop a good bit before people start taking these homes off the market.
By mjd @ 08/25/09 11:37:31 AMreport abuse

$8000 Tax Credit???

We closed on our home February 26 and still have not seen any $8000 credit.

By Brian @ 09/11/09 10:52:38 PMreport abuse

waterfront property

I don't think coastal property is selling that well. There is better awareness now of the higher risks, rising sea levels, higher insurance rates, eroding shorelines, poor water quality, etc.

By Jennifer @ 09/10/09 04:11:50 PMreport abuse

Seeing is Believing...

I believe we should follow our own advices. In the past people would always get blindly optimistic tips on some hot stock or fund from their broker. Many people buy into these tips and the broker get rich on the commisions. Then the stock get crush and people lost their saving. Some people find out later that their broker never had any share in the hot stocks they were selling. And they wonder why. So I say to you, don't start believing until you are seeing with your own eyes. Why buy a house when you know it won't go up much in the next few years and possibly drop lower in value. Just look at what happened with home values in Japan in the last TWENTY YEARS.

By Polly Anna @ 09/03/09 01:05:22 AMreport abuse

Short Sales

I am a Realtor in the Cumming area and am currently trying to prevent a foreclosure from happening. I have had a contract in that is only $1,000 below the banks appraisal. The homeowner has a second mortgage and the current argument is between the 1st mortgage (who is trying to foreclose) and the 2nd mortgage. The 1st will give the 2nd xx amount of money but the 2nd wants more. The catch is the 1st is Merrill Lynch and the 2nd is Bank of America. Bank of America owns Merrill Lynch!! They have both said they will let the homeowner be foreclosed on - all over a $6,000 descrepancy! They have no compassion for the homeowner or the buyer that has been waiting for 3 months to see if they will get this home. It seems to me that we should try to resolve as many of these potential foreclosures as possible to pull ourselves out of this housing crisis- I am so Outraged at these banks!! Can you help Clark?

By Becky @ 09/02/09 04:57:34 PMreport abuse

Dave's Rx for Utopia

Hey Dave, Me and some of my Russian pals tried your prescription about 90 years ago, but we went even farther and actually killed a lot of the rich folk because it's way easier to take their stuff when they're dead. Darn it though the whole thing didn't work out too well. A kindred soul, Pol Pot and his buds tried again in the 1970s. Nope, nada, nyet, millions dead but still no classless Utopia.

But I'm sure THIS time will be different, so you go girl!

By Ghost of Lenin @ 08/26/09 12:56:38 PMreport abuse

Dear Medical Student

You, as future generations, are having to pay for the sins of your fathers. That is why you are paying $6000.00 for a property you paid only $165,000.

By Cindy @ 08/26/09 07:42:59 AMreport abuse

Saturated market

Ummmm, the rental market is saturated. Rent is low and you can negotiate hard if you're a good tenant. Don't forget about all those condos that turned into apartments!

By Medical Student @ 08/25/09 11:03:59 PMreport abuse

I'd vote for you!

Dave! I'd vote for you but I can't afford the gas to get to the polling place! Guess I could mail it in but I still can't afford the gas! I like your idea of having the gov'nt paying for my internet use! Good idea.

By macattack @ 08/25/09 06:49:58 PMreport abuse

be a landlord

All the people with money should buy these bargain homes, and rent them out. it would help the banks and the housing market out. It would help out all the recently disposed homeowners by giving them a way to have a roof over their head that their current salaries can afford. (with no hard to understand interest payments..heh heh) It would also set the economic classes more like Mexico...where the rich get great interest off the poor and the poor have no choice but to rent or lease everything, forever. There is no middle class, no way to overcome the huge interest rates in order to own. The local VW dealship in Cancun gets 40% interest on secured car loans. the rich get richer, and the poor stay that way. It could be the same way here...so while you still have a job: withdraw that 401k, sell some stocks you know are going to tank again, and buy a house to rent to the new class of poor!! if you have 4 or more they will keep you rich, while the poor will stay that way through the second part of this depression as government spending wipes out the value of the dollar and inflation takes hold...then to cement the class divide we could have a republican president and congress come in after obama and viva la 2 class system.....or we can go the other way, and use the rich to pay for the mistakes of the poor, creating one big middle class nation. government subsidized by huge taxes on everyone (expecially the rich) providing free health care, schools, affordable housing and cars, social security, and while they're at it: free internet, cellphones and cable tv with movie channels for the middle class masses.

By Dave @ 08/25/09 05:35:18 PMreport abuse

Call it a depression!

Since summer of 2007 I've been calling it a Depression. I've never been out of work! Today my brother faces foreclosure on a home 2-3 hours from SF, CA. I've talked to people and over heard people in the CA foothills that they just lost a job, their is no work, the County just canceled my contract. Called my firewood supplier and two phone numbers down he had been disconnected. Still see him in town once in while. Oh, my wifes wealthy Uncle is buying foreclosed homes and sitting on them. Now we barely get buy but our rent is low and I do all repairs to keep it that way. Just went out this AM before it got to hot and repaired the well. Racoon broke our 1/4" water line to the cooler while we were out of town and ran our well dry and heated up the pump which caused more leaks at the well. Muddy racoon tracks are easy to tell and they were right there on the wall by the broken water line. How depressing. LOL

By Mark Hillyard @ 08/25/09 03:46:16 PMreport abuse

It's Not Over Until The Fat Lady Sings

And she won't be signing for a very, very longtime. No Jobs=No Recovery

My property taxes and tuition went up, but my homes value, wages and hope this country will ever recover from all this corruption has been plummeting. And to top that off 25% of my net income goes to health premiums, I will be dropping it next month, sure hope I don't get sick. Maybe I should go to the Clark forums to rant, sorry. lol

By Chris @ 08/25/09 03:04:41 PMreport abuse

agree with ed t

Ed hit the nail on the head. Eventually these hidden bad mortgages will have to be exposed on the banks financials and when they are, look out. Then you may see the real bottom. Thats when prices may finally come into line with what people can really afford. Most housing is still way overpriced.

By mjd @ 08/25/09 02:22:48 PMreport abuse

Agree with Ed T: The Next Wave

From what news I have seen, it appears that the initial foreclosures were mostly due to adjustable rate mortgages. First time buyers were easy prey; they did not understand the fine print. Perhaps some just did not try to understand as well. To an extent, it also happened with people who did not understand that they were in an interest-only payment plan for x number of years, which reset to higher payments.

The next wave of foreclosures has only begun. These are the buyers who had golden credit scores, good steady employment history, and the wisdom to choose a fixed-rate mortage. Thanks to the first wave of foreclosures, the domino effect has caused them to lose their jobs and, as to be expected, those golden credit scores.

By Chiliheadwizard @ 08/25/09 02:15:46 PMreport abuse

housing market

Isn't the recent housing activity just due to the artifical incentive provided by the government---the $8000 tax credit? If so it really isn't market driven and a "real bottom".

By ann @ 08/25/09 01:15:17 PMreport abuse

This dance is just starting

The banks have millions of bad mortgages hidden on their books. These loans are non-performing, but they won't initiate foreclosure because it would expose the bank as insolvent. One day these houses will have to go on the auction block, and when that happens, look out below! Anyone who thinks house prices have bottomed is crazy. And don't even get me started on commercial real estate...

By Ed T @ 08/25/09 01:06:07 PMreport abuse

Taxes!

I'm a fairly liberal person, but I live in a locale where the property taxes are simply outrageous. The houses near me are affordable, but anywhere from 33%-50% of your monthly payment is going to taxes. Why should I have to pay over $6000/year on a house I paid $165,000 for? The roads are falling apart, the schools are the pits, and police give out speeding tickets left and right without fighting crime. Cleveland doesn't rock as Drew Carey would have you believe. It sucks!

By Medical Student @ 08/25/09 12:03:53 PMreport abuse

Happiness and Success for the Bears

There seem to be a lot of assumptions built into this article. "Buy when there's blood in the streets" seems like a good idea at first blush, but remember, tomorrow there may be more blood in the streets, and some of it may be yours.
In the end, as always, it will be discovered that there were few who had the resources and psychology to have bought at the bottom.
Me? I'm not buying yet, I'm hunkering down for the next down-leg.
_aleph_

By _aleph_ @ 08/25/09 11:51:36 AMreport abuse

Because of fairly stagnant wages over the last several years, even after the steep drop in prices over the last year, it is still too expensive for most who want a home to be able to afford one. I still think prices need to drop a good bit before people start taking these homes off the market.

By mjd @ 08/25/09 11:37:31 AMreport abuse

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Aug 24, 2009 -- Early signs of housing recovery may be premature

What others are saying