Are We Heading For A Double Dip Housing Recession? Essex Mortgage Bank Thinks So!!
The recession started in the housing market, so the recovery underway should include the housing market in some way, right? That makes sense, but hasn't happened yet.
[USPRwire, Thu Jun 24 2010] This deterioration has fired up those calling for a double dip in the economy. If housing is slipping back into the mud, they contend, so will everything else until another shot of taxpayer-funded stimulus ( http://www.fhasubmissions.com ) gooses the numbers higher again. Given recent warnings from Moody's and S&P about the possibility of the US losing its triple A credit rating by slipping too far in debt, the choice between a sinking economy and a sinking balance sheet will be a tough one. Well, it would be for anybody but the government, which seems to never find it tough to choose higher.
To my way of thinking the housing industry in the U.S. is as large a concern, and probably also is to the Fed.
As I have said before, softness in housing and autos frequently leads the economy into recessions, and housing and auto sales are almost always the driving force that pulls the economy out of recessions.
Unfortunately, this time the housing industry fell not only into a recession but a depression, with a record decline in home prices and home sales, and record level of defaults and foreclosures, ( http://www.fhasubmissions.com ) such that it didn’t stand a chance of pulling itself out of the hole. It took dramatic government support and stimulus efforts, including providing first time home-buyers with a down-payment via the rebate program and the Fed buying more than $1 trillion of mortgage-related securities. Both programs expired in April.
We can already see the dramatic negative impact on the housing industry of the end of those programs, and the inability of the housing industry to make it on its own. Mortgage applications ( http://www.fhasubmissions.com ) are down 40% since the end of April. The Housing Market Index, which measures the confidence of home-builders, plunged to just 17 in June from an already low 22 in May. New home starts plunged 10% in May, with starts of single-family homes dropping 17%. Take a look at the builders, too, like Lennar, Toll Brothers, Hovnanian and the whole lot of them in the SPDR Homebuilder ETF--all down sharply as the housing recovery has stalled. The SPY tells the tale of a worried market, too.
Put it all together with the unexpected retail sales decline in May, and the negative surprise of the May employment report, and it does bring back concerns, and in fact raises the odds, that the economy will double-dip back into recession.
Recent economic reports seem to underscore their worries.
There was the very disappointing employment report for May, and the report that retail sales unexpectedly fell 1.2% in May. Those are two critical areas for the recovery, jobs and consumer spending.
I am still of the opinion that the housing industry is of more importance to the recovery, as it creates so many jobs in other areas of the economy. And the early returns regarding housing activity in May and June are certainly not encouraging.
Mortgage applications ( http://www.fhasubmissions.com ) are down a huge 40% since the home-buyer rebate plan expired in April. It was reported this week that new housing starts plunged 10% in May, with single family home starts plummeting 17%. And permits for future single family home starts fell 10%.
A panel of commercial real estate experts ( http://www.fhasubmissions.com ) predicted a "double dip" recession triggered by growing defaults of commercial loans.
The experts were speakers at the National Association of Real Estate Editors conference in Austin, Texas, this week’s gathering of real estate news writers from across the country.
Values on commercial real estate in the U.S. has fallen by at least 40% - and by perhaps as much as 80% to 90% on hotel properties,
with numbers like these its really hard to to think we are moving in any direction but down ....so the question remains can the overall economy recover ( http://www.fhasubmissions.com ) without the housing market being a pert of it ? It would be a first but then again stranger things have happened these past couple of years.For more information in regards to the overall health of the real estate market or for all your real estate financing needs contact branch manager Jeffrey Martino Young at Essex Mortgage Bank toll free 1-877-870-2676 or http://www.fhasubmissions.com
Jeffrey Martino Young
Essex Mortgage Bank
1585 Terrace Way, Suite 158
Santa Rosa, CA 95404