1. Unemployment: Until people have the income to afford their mortgages, we will not see a recovery in the housing market. I believe a direct correlation exist between unemployment and mortgage defaults, the higher unemployment gets the more defaults we will see. This ultimately leads to more inventory and of course, lower home prices.
2. Tightening Credit Standards: The harder it gets for people to obtain the necessary credit to purchase a home the slower it will take to reduce the inventory we have. Make no mistake, I don’t believe in loosening credit standards for the sake of it but, it’s a fact that if people can’t get credit, inventory won’t reduce quickly and therefore slowing if not halting a housing recovery.
3. Artificial Government Inventory Control: In other words, arbitrary influence by the Government to keep unworthy homeowners in their homes at all cost. Make no mistake, this is housing inventory control in the most negative way. I have GSE Investor loan reinstatements after foreclosure on my desk right now where Fannie / Freddie is offering to reinstate a homeowners loan where they will consider unemployment benefits as income……..seriously!
4. Energy Prices: Did you realize that you are paying .86 cents more for gas this week than you were this same week last year? Most likely you haven’t noticed because we have all been pre-occupied with the nations job losses, underwear bombers, Massachusetts election, and Washington bleeding red ink. You may not have actively noticed it but, if energy prices continue to rise people will have less discretionary spending and that pulls buyers out of the market and couple this with Great Depression level unemployment and we end up with more housing inventory.
5. Risk of Hyperinflation: As the US currency continues to looses value against it’s competitors we find ourselves having no other choice but to increase inflation. If the Government continues to spend / make money with less and less value people refuse to hold onto the Dollar and start to move their assets into other currencies or metals and therefore an uncontrollable rise of inflation begins.
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