Warning to Politicians: Housing Mess Affects Everyone
I know I tread housing stats all day every day, but two particular numbers struck a nerve today.
A condo expert I was interviewing in Miami Beach told me that at the current sales pace there is an 18 year (yes, year) supply of condos on the market here.
As I was trying to digest that, the Census released its quarterly home owner/vacancy report, and noted that there are close to 19 million vacant homes in America today.
And that's a quarterly improvement.
There will be plenty of election night discussions on CNBC and other outlets, I'm sure, on how the outcome of elections will affect economic policy and trickle down to housing. Some will argue that a Republican surge will quash any hope of more government stimulus in housing, while others will argue it will give the banks more breathing room and help investors back into mortgage investment.
I don't know what to believe today when I look at the sheer numbers.
The gentleman I was interviewing here in Miami Beach is a real estate broker/consultant whom I met several years ago during the condo boom here in this same city.
I remember asking him then how it was possible that there was enough demand for so many new condos. Obviously there wasn't, or perhaps there was enough demand, but just too much faulty leverage.
Today that has all changed here.
"The anticipation and the anxiety in the market today is the same as in the boom; the difference is today it's cash, during the boom it was all leverage, but it's the same mentality. People are not buying to consume, to live to contribute, they're buying to make money," says Peter Zalewski of Condo Vultures. "These individual investors, primarily foreign, are basically parking their money, and what's interesting is as people get foreclosed, and there have been 250,000 foreclosure filings down here, people are giving up their homes and moving into a similar type of lifestyle for reduced costs, so they're keeping the rental rates higher than most people would have anticipated."
Nine out of 10 buyers here are foreign, many of them Venezuelan, looking to secure their money somewhere outside their country due to financial turmoil at home. There are very few U.S. buyers because there is just no financing out there. Some cagey investors are actually buying with cash and then refinancing the cash out, because apparently the banks are more willing to refi than originate new purchase loans. But this is Miami Beach, which is not really America.
In the rest of the country millions and millions of homes are sitting empty and household formation is near historic lows. The troubled U.S. economy isn't all that enticing to immigrants anymore, so you're losing even more demand there. The critical confidence needed to bring buyers back is nowhere to be found, even in some of the nation's more healthy markets.
The foreclosure freezes may stem the tide of bank repossessions temporarily, but eventually more distressed properties will flood the housing market, pushing home prices lower yet again. Yes, it will be largely in the former boom states, but the headlines will spread their doom and poison as they did before.
Paul Krugman warned in the New York Times this weekthat those of us yelling about the moral hazards of housing bailouts are just hurting ourselves. That's because we, the ones doing the yelling, the ones paying our mortgages, are the ones most hurt by housing's continued downfall in the long term. We may not lose our homes, but we lose everything else: We lose equity, job security, safe and clean neighborhoods and finally, the ability to get credit.
I admit, I've been one of the moral yellers at times.
It infuriates me that others get a bailout while I sit and pay.
I even tried to get my share, refinancing at these government-induced low rates, but some appraiser in Ohio overruled the local appraiser and dropped my home value by a ridiculously wrong amount (and trust me, I know my market.) There's your housing reform at work, costing me more money in the end.
So here we sit at the precipice of possibly a new force in government.
This as we have nothing less than the restructuring of our entire mortgage finance system (Fannie Mae and Freddie Mac) all warmed up on our plates.
No question, the coming year will be historic for housing's future. I would just caution those who shape it to keep an eye on the numbers, always keeping in mind that there are homes, people, communities and jobs behind them. While the fixes may not be fair to some, they may just be the bitter pill we all need to swallow to build our wealth once again.
Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick