National Homeownership Month

by Mary

Did you know that June is National Homeownership Month in honor of the Bush goal to have everyone have a chance to own their own little piece of America? This year, the theme is to help home buyers by providing more information about what they should watch out for when buying or keeping a house. From the HUD press release we find:

Too many families have been steered into accepting high-cost, high-risk loans. Teasers rates and balloon payments have confused many buyers, which is why the Bush Administration has increased the budget for counseling from $13 million to more than $41 million - a 200 percent increase - to help prepare families to buy their first home, avoid predatory lending practices, and assist current homeowners facing default. In the coming fiscal year, the President has requested another increase - to $50 million - for housing counseling grants.

My reaction to their noble goal was "talk about closing the barn door...."

Just to let you know, some people think the economy is doing quite well. Oh, yeah, there is that little problem with the subprime mortgage market, but that won't effect the economy because people are bullish these days and consuming up a storm. According to some financial gurus, the only thing the economy needs to worry about is that old pesky interest rate as it looks like employees are asking for too much from their employers and the average wages are going up.

In fact this economy is so good that George Will was remarking that it was too bad that the Democrats weren't going to be able to make an issue it during the election because Bush had created a splendid economy. (It was all those tax cuts, you see.)

Too bad for Will the Wall Street Journal is starting to sound less like a Bush economic cheerleader, and more like those economic bears that are warning the country has not hit bottom in the housing market and the bodies haven't even started to pile up. There's a lot of hurt on the horizon. Here are some of the more interesting bits from the WSJ last week (courtesy of Noriel Roubini).

Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless.

Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.

...This worry coincides with a surge of inflation anxiety that has roiled stock and bond markets in recent days.

...The rise in interest rates is only adding to the gloom. The average rate for 30-year fixed-rate mortgages stood at about 6.65% Friday, up from 6.35% in early May, according to HSH Associates, a financial-publishing firm in Pompton Plains, N.J. Though that rate remains far below the 8.2% average of the 1990s, the recent jump makes it harder for many Americans to afford new homes. "That's putting more pressure on housing and delays its ultimate recovery," says Andrew Tilton, a senior economist at Goldman Sachs in New York.

Federal Reserve Chairman Ben Bernanke acknowledged in a speech Tuesday that the housing market remains weak, and warned that residential construction "will likely remain subdued for a time, until further progress can be made in working down the backlog of unsold new homes."

...Late last year, some economists were saying the market would start bouncing back by the middle of 2007. That hasn't happened, partly because inventories of unsold houses have continued to grow and a surge in mortgage defaults has made lenders much more reluctant to grant credit to people with spotty payment histories.

David Resler, chief economist at Nomura Securities International Inc. in New York, says he is surprised by the degree to which speculation caused builders to overestimate demand, leaving a glut of houses and condominiums.

...Housing accounts for a lot of jobs, not only in construction but in related areas such as mortgage finance and furniture sales. Zoltan Pozsar, senior economist at Moody's Economy.com, estimates that housing-related sectors created nearly 1.3 million jobs between January 2003 and March 2006. Since then, he says, housing jobs have declined by almost 300,000. He sees more losses to come during the summer, which is usually a big building season.

...A prolonged housing slump would be particularly painful for retailers of the kinds of things people often buy when they move, such as building and gardening supplies. According to the Commerce Department, those retailers saw sales drop by 6% in the year ending April.

Meanwhile, empty houses are multiplying. A recent Merrill Lynch report tallies a record 2.2 million vacant single-family homes and condos for sale nationwide, about one million above the norm.

...Mark Zandi, chief economist of Moody's Economy.com, a research firm in West Chester, Pa., expects lenders to acquire about 900,000 homes this year and roughly the same number next year through foreclosures, up from an average of about 500,000 a year from 2000 through 2006. That will add to the glut of homes on the market, further depressing prices in some areas.

When Bush's term is done, there will be a lot less people owning their own home. Some economists think that it will take at least another five years before the housing market recovers. For many of those people who stand to lose their homes, recovery might not ever come.