It’s that time of year again.
Yesterday, I spent 30 minutes on the phone with a reporter who wanted to know what I think the housing market will look like in 2011.
For reporters and editors, the end of a calendar year is a terrific time to look forward. Not only will making projections eat up a huge amount of space (just think about the permutations of looking forward), but it allows journalists to be somewhat intellectually lazy. It doesn’t take much imagination to call up and ask so-called experts (or just ordinary folks) what they think will happen next year.
But year-end projections are wildly popular with readers (or so the thinking goes), and so around this time of year everyone starts to look forward.
I won’t make you wait until the article comes out to find out what I think the housing market will look like next year. Here’s my bottom line: It’s all about jobs.
The lack of good jobs and the continuing levels of incredibly high unemployment have made this an extremely painful recession – the most painful in decades. There are a lot of people who are out of work, and have been out of work for a very long time (years in many cases) and there are those who are earning a lot less than they were two or three years ago.
No one in Washington, D.C. seems to have a good idea of what to do about this lack of jobs business. But as I explained to the reporter, if you don’t have a good job that pays all of your bills, you can’t make your mortgage, insurance and property tax payments. And if you can’t do that, you can’t buy a house (new or existing).
The lack of employment is directly tied to another big housing market problem: Foreclosures.
Millions of homeowners who lost their jobs or took a massive pay cut have now lost their home to foreclosure. These foreclosures have devastated neighborhoods, causing blight and increased crime. They have also devastated the budgets of municipalities nationwide. How are our cities, towns and villages supposed to pay for needed services (like firefighters, schools, water, sewer and garbage) if half the homeowners have abandoned their properties or been foreclosed upon and have stopped paying their property taxes?
Here’s what I think the housing market will look like in 2011: More of the same. We’ll see more foreclosures, maybe even home prices declining more in some areas. We’ll see home sales stay about where they are now, even with the Federal Reserve’s $600 billion QE2 (bond-buying program) to lower long-term interest rates from the record lows of today.
At the end of the conversation, the reporter said, “Wow, this is sort of depressing.”
What did you expect, roses?
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