3 reasons the housing recovery may not last

I wanted to share an article from last week on CNN Money. I believe that it is great to remain optimistic especially in our economy to date however; I also feel that it is equally important to remain realistic and grounded. Anything can happen. That is the one thing I have learned well in my life and in my career. I feel very strongly that it is best to be prepared for the best and worst case scenarios and make the best choices with the information we have right now while remaining positive for the future.

It is common knowledge that the short sale market has slowed quite a bit but that does not mean we are out of the woods yet. I still feel we may see a surge of homeowners wanting to short sale their property for various hardship purposes. I still have clients who want to take advantage of the mortgage debt relief act that is set to expire by the end of the year. If you have clients who you believe need to short sale but they are on the fence I would urge them to make a choice sooner rather than later in hopes to take advantage of the tax relief. We are already close to half the year gone. Only 6 months left. Be sure to have them speak to an attorney and CPA to gather all the proper information in this regard before making a decision.

Feel free to reach out with any questions or short sale scenarios you would like to discuss or help with any of the following:

- Pre Qualifying

- Pricing

- Marketing

- Short sale listing appointments

- Handling objections

- Short sale updates

- Negotiating

NEW YORK (CNN Money)

The housing market has made a big comeback over the past year; home prices have surged some 8% and home buyers can't seem to buy up properties fast enough.

But just as quickly as the market is gaining ground, some industry experts worry it will come crashing back to Earth. Here are three reasons the housing market recovery may not last:

 

1. The housing recovery is being led by investors. One problem is that investors are leading the latest surge in home prices, said Dean Baker, co-director of the Center for Economic and Policy Research. They are taking advantage of low interest rates and depressed home prices and when those rates and prices rise, they'll likely pull back, he said.
"An investor-driven boom is likely to end badly," said Baker. "I'm worried that some of the big jumps in prices are driven by the same sort of speculation that drove the [original] housing bubble."
And while institutional investors and small but experienced mom-and-pop outfits have been buying many of the properties, there are a growing number of inexperienced "armchair investors" now buying into the boom -- a sign that demand may be peaking, Baker said.

In some hot markets, home prices should start slowing or even reverse gains. In Phoenix, where selling prices were up 23% year-over-year in January, many investors planned to rent out the properties they bought. "Yet, there was no comparable increase in rents and the rental vacancy rate in Phoenix is very high," said BakerAs investors realize a low rate of return on their investments, demand will soften, he said.

2. The economic recovery is just not strong enough yet. "These days, I worry more about the economy hurting housing than housing hurting the economy," said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a Washington D.C.-based think tank.
He's especially concerned about employment. Hiring slowed significantly in March, with just 88,000 jobs added -- the weakest showing since last June.

Meanwhile, half a million Americans withdrew from the workforce during the month; either because they stopped looking for work or retired and stopped drawing unemployment. Many were discouraged workers, a sign that the economy remains weakened.

While Bernstein thinks the housing recovery will continue, he believes it will do so at a much slower pace. Once the jobs picture improves, he said strong pent-up demand for homes should emerge.

3. Government cuts will hurt homeowners. Headwinds from the current round of government
spending cuts -- $85 billion worth -- could also curb the housing market's recovery.
"The spending cuts from the sequestration [will] hit their apex this summer," said Mark Zandi, the chief economist for Moody's Analytics.
The cuts, including unpaid days off for federal workers, cuts in unemployment compensation and decreased military spending, combined with the expiration of payroll tax breaks earlier this year, will lead to job and income losses that could strip about a percentage point off the GDP this year, according to Bernstein.

And while current mortgage rates remain extremely low, about 3.5% for a 30-year, fixed-rate loan, they're bound to go up, the industry experts said, making it a lot more costly for people to afford homes.

"I'm worried that it's too tough for many people to make the family budget, including the mortgage payment," said Bernstein.

REALTORS, what is in your business plan this year? What are you doing to create a system that will allow you to build your short sale business? How often are you out there prospecting and how do you know if you are taking the listings that are going to be successful and not a waste of your time?


Call us today and let us show you a system that works to help you expand your business and effectively and efficiently close short sale transactions.

LOTUS REALTY GROUP
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