by Broderick Perkins
4/14/10 - There's a growing litany of reasons the housing market remains in deep meltdown -- and as many as 10 years away from solid ground.
The Federal Reserve no longer purchases mortgage backed securities. While it hasn't happened yet, that could cause mortgage interest rates to rise.
Subprime replacement loans from theFederal Housing Administration are tougher to get. Consumers were already struggling with tough underwriting standards from private lenders.
The federal home buyer tax credit ends this month. The tax credit has been one saving grace for the housing market.
Federal programs have only helped a fraction of the estimated 3 to 4 million homeowners targeted. That's largely because lenders just don't cooperate with fast help necessary based just on the sheer number of people in trouble.
First American Core Logic says more than 11.3 million home owners are underwater on their mortgages. These are potential foreclosures, a shadow market of depressed priced homes due to flood the market.
Unemployment remains in double digits in many hard hit housing markets.
See where this is going?
"As much as we want to believe otherwise, values peaked so much and then dropped so much, the laws of appreciation and common sense will tell you that it will be 12-15 years before people see the peak values that they saw in 2006-2007," said Robert Aldana, a real estate agent with Intero Real Estate Services in San Jose, CA who is not afraid of peer chiding to tell it like it is.
"Our economy is not exactly booming and more and more people are losing their homes. It may not be a stretch to think that it could take even longer than 15 years if we continue to come down in prices. For every year that we see declining values means it will take two years to catch-up," says Aldana who works the Silicon Valley tech Mecca housing market.
As dire as they sound, Aldana's comments are inline with an instantly controversial analysis of home price trends for more than 375 U.S. markets.
From Fiserv Case-Shiller a financial information analyst, the griim study says the housing crash won't correct to boom-time levels of 2006-20007 until 2025 in major metro areas of some of the nation's worst hit housing markets -- Arizona, California, Florida, and Nevada.
Sacramento, CA and Orlando, FL won't be back until 2039, the report says. It'll be 2023 for San Jose, CA and 2020 for Jacksonville, FL and Tucson, AZ, to name just a few.
Even urban centers in the Northeast and industrial Midwest will be on the ropes for a decade.
"Nationally, Fiserv Case-Shiller data points to a further seven percent decline in home prices through the end of this year, with a prolonged recovery beginning early in 2011. In many markets, the emphasis is on the word 'prolonged,'" said David Stiff, Fiserv's chief economist.
That's because when home prices crashed, so did the economy -- into the deepest recession since the Great Depression. Now the economy is hung over with lingering high levels of unemployment.
Home prices crashed, largely because of easy money that allowed home buying even by the barely employed, even unemployed. Predatory lending and subprime loans swamped urban neighborhoods.
It all pumped up a lust for what became known as the "psychological equivalent of gold" which caused home values to skyrocket to unsustainable levels.
"The higher you go, the further you fall," says Aldana.
The housing market never promised you a rose garden.
Like most investments, it can be a thorny, risk-based investment.
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