In October 2010, I wrote about real estate short sales in an article titled, "An End To Easy Lending: The Irony and Agony of Real Estate."
The irony was that there's nothing SHORT about trying to buy a house via a short sale. It's usually the longest, most drawn out means of buying a home -- and it often ends in failure. As an example, I provided my own experience of jumping through hoops for three months as I waited for the bank to approve my own short sale offer on a totally affordable apartment -- only to be denied.
In the meantime, the owner of the property, who was intent on doing the noble thing to avoid foreclosure by selling the apartment for less than the purchase price, couldn't hold out any longer and ended up filing for bankruptcy. Final score: Bank: 0, Buyer: 0, Seller: 0
That led to the "agony": Banks, once the grand facilitator to achieving the American dream of home ownership are now the ultimate impediments to that dream. While mortgage rates stand at historically low levels, the increasingly strict lending standards of institutions make it harder for even the most creditworthy person to buy a home.
In the end, the seemingly confounding scenario was exactly as EWI President Bob Prechter anticipated in his 2002 book Conquer The Crash with this mind-blowing insight:
“When the social mood trend changes from optimism to pessimism, creditors, debtors, producers, and consumers change their primary orientation from expansion to conservatism. When lending officers become afraid, they call in their loans and slow or stop their lending no matter how good their clients’ credit may be in actuality. Instead of seeing opportunity, they see danger.”
So, the big question is -- how have things fared since then? Has the "agony" of a fear-stressed housing slump finally turned into a confidence-inspired recovery?
Well, in the days following my original article, a slew of upbeat housing reports emerged that prompted the mainstream pundits to declare that yes -- in fact -- the worst was finally over. Among them:
- US housing starts leapt to a four-month high.
- New home sales gained 6.6%.
- US existing home sales soared 10%, the strongest gain in nearly 30 years. In the words of one major news outlet: "Realtors: US Recovery Has Begun. We're clearly seeing a solid bottom in the housing market. The overall direction should be a gradual rising trend in home sales." (Associated Press)
Flash ahead to today, and it's plain to see that said "recovery" in housing never existed. Like a weakened scaffold, the supposed "floor" of falling values dropped out beneath the sector once again, leading to even further losses. Here, this January 11, 2011, news item fills in the details:
In the month of November, home prices fell the 53rdconsecutive month, taking the decline past that of the Great Depression for the first time in the prolonged housing slump. Home prices have fallen 26% since the peak in 2006, exceeding the drop off registered in the five years of 1928 and 1933. (Reuters)