Scott Miller's Welcome to the Jungle Blog

Welcome to the jungle. The environment we are in these days feels like a jungle and you never know what is around the corner ready to hunt you down, kill you and then eat you. The housing market seems to be in free fall with no end in sight well at least until 2015 according to “The Wall Street Journal” Article Home Forecast Calls for Pain on September 21, 2011. Since its peak in 2005 housing prices nationally have fallen 31.6% and fall another 2.5% this year and then start to rise 1.1% through 2015 according to survey of economists.

However there is still the 9+% unemployment rate that seems to not go away and consumer confidence is dropping leaving me to believe that with 7 million plus homes in Shadow inventory about to be dumped onto the market that we may see a decline in housing for much longer.

To make matters more interesting, there are jobs available but people cannot get to those jobs. Homeowners are stuck in a home that is worth less than they owe so they cannot sell it. They also are not able to purchase a new home because they cannot qualify. One because they cannot sell their current home and they cannot rent it out as the competition in the market is valued so much less than their current homes value. This allows current purchased home to rent for less and for the upside down homeowner they would have to rent for less than their payment. Most people cannot afford that and their options are limited.

Their options are keep it and stay put, rent it and cover the difference if they can for the next 2 decades from now when the house appreciates to a point they can sell it, short sell it, or walk away from it. It seems the Fed would like us to refi as they buy the long end of the yield curve to drive 30 year mortgage rates to their lowest in 50 years. However, out of the 28 million mortgages 85% of these people are above 5.1% interest. Why? Either they cannot refinance because they are so far upside down or they do not make the income to support the old or new payments anymore, or they are just done playing the game and want to pay off their loans. Either way it is not helping to continue to buy the rates to all time lows for most people.

So I have a suggestion and it is not a popular one with a lot of people in my industry or in the political spectrum. Also the blame game is out of control of who created this mess. I will address my thoughts on this and then come up with what I feel is a solution to the problem in my next two blogs so stay tuned.