Posted by: Marvin Remmich | December 19, 2011

THINKING ABOUT HOME

With less than a year before a national election, what’s on voters’ minds?  According to a survey by Houselogic.com,  the number one issue is jobs, followed by a related one: housing.Are you surprised? Beyond the universal pain caused by the housing crisis, people understand that the economy won’t improve until housing does. The housing sector accounts for over 15 percent of the nation’s gross domestic product, as the National Association of Realtors® points out, and it’s taken a series of hard hits over the past five years. There are as many proposed remedies as people, but no one doubts that housing is the key to real recovery.

Of course, depressed prices make for great deals, and cash investors are taking advantage, accounting for a large percentage of current sales. Those without huge stockpiles of cash can still buy through FHA—provided their credit is pristine.That leaves out a large swath of owners who were burned in the big price run-ups—and subsequent collapse—of a few years ago. With underwater loans, they can’t move up because they can’t sell. Even if they could, they couldn’t buy—their credit too often damaged by delinquency. About nine percent of them are unemployed—not counting those who are underemployed or have simply fallen off the radar. Until that large middle group of homeowners is liquid and mobile again, it will be hard for housing gains to make much headway.  If the jobs picture can’t improve until housing does, the Catch 22 is that housing can’t recover till employment improves. This is the kind of problem that makes policymakers sweat. Government remediation efforts to date haven’t made much of a dent.

Where’s the answer? Actually, it’s already in place, working quietly under our noses. Those cash investors may not be popular or glamorous, but they hold the key to economic renewal. And don’t count out those first-time buyers for whom the housing crash is only a vague memory from adolescence.The real estate scene may look like a burned-out wasteland, but look through the smoke: there are signs of life amidst the embers. 

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