Ron Phipps, head of the National Association of Realtors, recently told the Senate Committee on Banking, Housing & Urban Affairs it's unlikely housing will play the same historic role in lifting the economy out of recession it has in the past. UPI/Kevin Dietsch |
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CHICAGO, March 20 (UPI) -- Despite the cheerleading from the White House, the U.S. economic recovery remains a question mark -- and with the possibility of a nuclear catastrophe in Japan, that question mark could pick up an exclamation point.
Though the latest unemployment report showed joblessness falling to 8.9 percent, experts agree 6.4 million workers have given up looking for jobs and don't get counted in the official totals. The Washington Post said adding them plus the millions forced to take part-time jobs would push the actual unemployment rate closer to 16 percent. And though the economy is adding jobs, it's not adding them nearly as quickly or in as large a number as required.
"We expect the unemployment rate to decline only very slowly because of the potentially large number of discouraged workers, even if job growth is sustained for several years; this is the 'glass half empty' part of the job market story. …," Freddie Mac said in its most recent Economic Outlook.
"The outlook is somewhat more encouraging on this front -- the 'glass is half full': A steadily expanding economy is expected to generate new jobs and rising incomes contributing to a gradual recovery in home sales, stabilization in house prices and declines in delinquency rates."
The Commerce Department reported last week housing starts fell sharply in February, 22.5 percent below January's rate and 20.8 percent below the year-ago level. Earlier in the month, RealtyTrac reported foreclosures are still dragging down the market as problems with the process are still being ironed out.
"There is little dispute that the financial crisis was partly the result of fundamental flaws in the housing finance market," Treasury Secretary Timothy Geithner testified before the Senate Committee on Banking, Housing & Urban Affairs. "The consequences of those flaws, and the losses Fannie Mae and Freddie Mac have inflicted on taxpayers, make clear that we must build a healthier, more stable market that will work better for American families and our nation's economy. …
"We allowed underwriting standards to erode and left consumers vulnerable to predatory practices. We allowed the market to increasingly rely on a securitization chain that lacked transparency and accountability. And we allowed the financial system as a whole to take on too much risk and leverage.
"These were avoidable mistakes."
Geithner noted the private sector remains gun-shy, leaving it to federal and quasi-federal entities to insure 90 percent of new mortgages. Geithner supports winding down Fannie Mae and Freddie Mac but billions still need to be poured in.
Ron Phipps, head of the National Association of Realtors, recently told the same committee it's unlikely housing will play the same historic role in lifting the economy out of recession it has in the past.
"Additional foreclosures and a shadow real estate owned inventory loom," he said. "As a result, housing starts may only reach 700,000 units in 2011 -- half the normal historical annual production, though an improvement from the 554,000 and 586,000 starts, respectively, in the past two years. That implies little addition to economic growth. It also implies a potentially faster than expected 'cleaning up' of what has been a bloated housing inventory, particularly as existing-home sales pick up."
In short, consumers are running scared.
Phipps said, however, tightening mortgage qualifications by increasing required down payment percentages and fees is not the way to go.
"By some estimates, 10 to 15 percent of otherwise qualified buyers with a demonstrable ability to repay will be turned away due to the overly stringent requirements. This represents approximately 500,000 home sales that won't happen, further dragging out the housing and economic recovery," he warned.
"Realtors believe that the pendulum on mortgage credit has swung too far in the wrong direction and it is hurting consumers and the economy. The harmful products that led to the bubble and crash are gone and no one is looking to bring them back, but making it harder for those who can afford a safe mortgage does not further the goals of recovery. …
"So, even though it is our belief that housing will not pull us out of this recession alone, the hampering of its recovery will severely, negatively impact any recovery that is, or soon to be, under way."
