Housing market optimism may be premature

Grand Rapids, MI -- (SBWire) -- 05/23/2010 -- Along with other notes of economic ‘good news’ in the media recently, suggestions surfaced that a turnaround in the housing market might be taking place as evidenced by a drop in delinquencies and total foreclosures. One bright spot: the Senate voted last Wednesday to ban no-doc or stated-income mortgages, which some call “liar loans” and helped cause the tumultuous downturn of the industry.

Dennis Tubbergen, noted financial advisor and CEO of USA Wealth Management, LLC, a federally-registered investment advisory company, questions a too-optimistic sentiment. He notes that when looking at statistics from the past several recessions, the percentage increase in current foreclosures since the previous peak is twice as high as during any other recession in recent history.

“From a foreclosure perspective, this recession is far worse than any prior recession,” Tubbergen, a well-known financial advisor, warns. “That’s pretty much a given no matter who you are talking to. But where is the housing market headed? Are we finally on the rebound given the better news that we’re hearing recently?”

According to Tubbergen, the behavior of the housing sector over this recession is unlike anything in recent history and to take a few numbers at face value may be indulging in premature conclusions.

n a May 13, 2010 article on CNNMoney.com, the author notes the total number of housing foreclosures fell by 9% from March 2010 to April 2010 and by 2% compared with the same period the previous year according to data given last Thursday by RealtyTrac, a company that tracks foreclosed properties online.

But if February home sales were far worse than this country has seen in the past 47 years, even when foreclosures plateau the numbers will remain high for the near future and possibly for months. How can this happen when new filings are down? Because banks and mortgage companies have extensive foreclosure backlogs whose paperwork will eventually make it through the system.

Foreclosures are closely linked to a state’s unemployment rate, with Nevada, Arizona, California, Michigan and Florida earning the top 5 rankings. And unemployment rates in those states still remain excruciatingly high, with Michigan at 14.6% and California closely following with 12.4%.

“In my view, recent housing sales numbers reflect a tax policy which has some potential home buyers buying homes now rather than at some point in the future,” states Tubbergen. “This policy could cause future home sales to fall from where they would have otherwise been.”

How does Tubbergen view the housing market’s future?

“Until the massive amount of consumer debt that’s out there gets dealt with, I question whether or not there truly can be a meaningful, long-term increase in home sales,” he concludes.

For more information on Tubbergen’s views, visit http://www.dennistubbergen.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause actual events or results to differ materially from those that were forecasted. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.