The economy is up; the economy is down. Unemployment numbers are improved but accompanied by a drop in labor force participation. Job growth is good but income growth is stagnant. Read what Fannie Mae, Chief Economist Doug Duncan has to say about it (Job Data ).
What does it all mean? It seems to mean that, for all intents and purposes, we are treading water when it comes to a housing recovery. For each step we think we take forward there is something else holding it back.
Fannie and Freddie have re-introduced their 97% LTV loans and FHA is cutting their annual mortgage insurance premiums. This is done to help spur housing for, and lending to, first time home buyers. Will it help?
What if these first time home buyers are not yet interested in buying a home because they worry about the stability of their employment and income? What if they are not yet comfortable in their careers and may need to relocate for employment opportunities. Why take on the expense and responsibility of owning a home until they’re settled? And, what if there are fewer second time home buyers because some refinanced their homes and restructured their debt, or, some are still a little upside down on their current mortgage. Maybe they’re not quite ready to sell to these “first time” buyers and move up.
Housing will begin a sustained recovery, which will aid in a sustained economic recovery, when consumers are confident in their employment and income potential. Consumers need to be confident in carrying their current debt load, e.g. student loans, credit cards, auto, and when they are comfortable in taking on the responsibilities and additional debt of owning a home.
Home ownership is still a dream that most pursue, but one that is being pursued a little more cautiously which is not necessarily bad. Hopefully, the new programs and FHA cut will help get some into the home buying market. It remains to be seen.