Alan Abelson channels Mark Hanson, to discuss the ongoing housing overhang. The bottom line remains that housing is likely to be a drag on the economy for the foreseeable future.
Hanson suggests that any prospect for an imminent housing recovery are based on wishful thinking, and not the actual data. And, he adds that the banks and servicers have become the “largest landlords in the world.”
“[Hanson] lists the many woes that afflict the industry. High up among them is “effective negative equity,” which he defines as the inability to pay off a mortgage, plus paying a real-estate broker 6% and coughing up 10% to 20% of the purchase price as down payment on a new purchase. Mark reckons that a majority of mortgages fall into that unenviable category rather than the 28% commonly estimated.He also cites a humongous default, foreclosure and short-sale backlog overhanging the market. Since 2007, he relates, there have been only four million foreclosure completions and short-sale liquidations out of a probable 14 million to 18 million. That alone is enough to give you the willies.
Toss in unfavorable demographics, mounting energy costs, a miserable excuse for a mortgage market and inexorably declining home prices…well, you get the point. Housing is one of those festering sores on the economy that will be with us for quite a spell. And so long as it is, or until jobs grow more abundant and consumer income muscles up, the likelihood of a decent and sustained rebound for the industry seems a good piece off. And, we’re afraid, the economy’s recovery is apt to maintain its desultory pace.”
Nothing in that I can see warrants arguments from me . . .
An Epidemic of Amnesia
Barron’s, MAY 28, 2011