Treasury Secretary Henry Paulson told the Senate Banking Committee today that the cost of the “program” to bail out Wall Street depends on a recovery in housing.
I’m wondering exactly what’s going to precipitate that recovery? In order to answer that question I think you have to look at what’s currently wrong with housing, not what caused the housing recession or how far all the numbers have fallen.
Housing today continues to stagger along, whacked in the head by a Reggie Jackson-style swing, unable to find its way. The Realtors claim housing is bumping along the bottom. The Home Builders say sales have bottomed but starts have not. The Mortgage Lenders say the market is still difficult and too tight to support a real surge in home buying.
The Appraisers don’t know how to value a home, so they’re undervaluing whatever they see (egged on by the lenders I might add), the frustrated sellers are, in some cases, walking away from homes, and in other cases pulling them from the market, and the buyers don’t want to touch anything that isn’t a total steal with a ten foot pole.
Did I mention foreclosures? There was all kinds of hoopla yesterday about putting foreclosure relief into the bailout plan, but how that would work, who would get a better rate/deal whatever and why, is so unclear and potentially impossible right now that any real results are many months away at best. After all, there are plenty of programs out there now to save borrowers and yet the foreclosure numbers continue to rise.
- Paulson, Bernanke Stress Risk to Markets, Economy
So what’s it going to take? I go back to the fundamental driver of housing: confidence. That’s what got us where we are ("fahkakta" confidence that it was), and that’s what’s going to get us out. The CEO of Lennar, after reporting a narrower earnings lossthan the last quarter, said the weakness in the housing market actually accelerated in the last quarter as a result of (among other things) weakened consumer confidence.
I hate to state the obvious, but what’s going on in Washington right now, the rush to save the economy from sure demise (or so the important official folks say) isn’t going to help that.
Yes, go fix the credit crisis. I’m not an idiot; I get the necessity of that. But the only thing that’s really going to fix the housing market is a true correction. Why don’t these folks get the necessity of that??
Questions? Comments? RealtyCheck@cnbc.com