Stricken with a cold that never quite goes away, the nation's housing market is stumbling once again. In the fourth quarter of 2014, home values dropped and builder confidence started to erode.
While headlines are being made with record-priced individual homes sales in some cities and stratospheric asking prices on luxurious spreads everywhere from Manhattan to Beverly Hills, those big numbers increasingly look like anomalies. The rest of the market, where regular people live, is sluggish at best.
CoreLogic reported that the share of homeowners with negative equity increased in the fourth quarter of 2014: the collective loan-to-value ratio for all mortgages was 59.7%, compared to 59.2% in the third quarter of 2014. CoreLogic's Housing Price Index, a barometer of home price trends, fell by 0.7% in the same period.
America's housing market became almost comatose late last decade, when CoreLogic's HPI measured a 12.7 decline between 2008 and 2009. Since then, our government leaders and Wall Street have pumped the housing market full of a cocktail of artificial remedies, from historically low interest rates to creation of a previously-nonexistent institutional asset class: Single Family Rentals. Although these fixes have driven some appreciation which has gotten the housing market out of the infirmary, the hospital gown is still on.
Apparently forgetful that the housing market is cyclical and oblivious that the market may well be on the precipice of another downturn, lenders have reduced down payments requirements and loosened borrower qualification standards. This is another artificial attempt to propel forward movement in a housing market which is still shuffling along on a walker.
In an unsettling display of declining confidence in the housing market's ability to recover, the National Association of Home Builders/Wells Fargo Housing Market Index dropped for the fifth straight month. The Index, based on a monthly survey of home builders designed to take the pulse of the single-family housing market, dropped to 53 from 55 in February and 58 last November. In September 2014, the Index hit 59, the highest level since November 2005. Shortly after that peak, the Index began its slide.
What does all this malaise mean? Low- and middle-income homeowners, who in the contemporary economy often have little or no safety net, cannot count on the slow-but-steady growth of home values that their parents' generation saw, and that they saw until just a decade ago. Enormous numbers of families lost all their equity, their jobs, and even their homes during the downturn, often leading to uprooting of families, financial ruin, and community blight.
American Homeowner Preservation purchases pools of distressed mortgages from banks and then offers sustainable solutions to keep families in their homes. However, AHP is like Sudafed to the housing market, treating the symptoms but not providing a cure.
Instead, the cure is an America in which those who want to work can find jobs that pay living wages, an America whose educational system offers students the ability to learn without burdening them with lifetimes of debt, an America in which the majority of the economic gains do not accrue to the wealthiest one percent. Until we figure out how to fix these issues, the U.S. housing market will keep getting sicker.