Housing Double Dip Is Coming
Twin Cities Housing Is Hurting:
Meredith Whitney, CEO of Meredith Whitney Advisory Group, LLC recently summarized the housing market to CNN as a mess, with lower prices on the way shortly.
I've consistently said that housing in the Twin Cities of Minneapolis/St. Paul and surrounding areas will decline 10-15% over the next 1 to 2 years. Ms. Whitney said housing will dip another 10% over the next 6 months. I believe this to be a comment regarding the national average. The Twin Cities of Minneapolis/St. Paul are typically above the national average when it comes to housing. Here are the reasons behind her comments:
1.) Banks have started releasing their inventory. This is the first time this has happened in the past year. More inventory comes back to the supply vs. demand simple economic outlook. More supply, less demand, lower price points.
2.) When it was reported that housing prices were up for the first half of 2010, it was not reported that 45% of the market was first time home buyers cashing in on the government first time home buyer tax credit. Those buyers are now gone.
3.) The mortgage market has had it's 9th consecutive month of shrinking volume. This statistic alone shows that not as many buyers are buying.
4.) Consumer credit is getting tighter. If buyers cannot be financed for a new home loan, they cannot buy.
5.) Unemployment is now the leading cause of mortgage defaults. In recent years, it was bad loans that restructured themselves that hurt homeowners. Now it is the unemployment that is causing homeowners not to be able to afford their homes.
6.) State and Local Government are actually cutting jobs. In years past, it was the State and Local Governments that would be hiring when the recession is close to an end. Since they are cutting, we can assume that they are not as optimistic as the current administration contends.
All said, there are many negative signs in our economy that are hurting the housing market. Until unemployment is solved, until the majority of the REO/Foreclosure homes are sold, and until there are some more lenient lending guidelines, the housing market it in for a plunge.
