August 2010: The ‘new’ reality | Eastern North Carolina Now

    The big story in August is that the national market is, in fact, stabilizing; but is doing so at historical lows (or either the short-lived, artificial recovery is petering out, but, at least for now, my fingers are crossed). Both the jobs and housing markets have rebounded, somewhat, from where they bottomed out in early 2009, but are still a long way down from the peak of prosperity--and perhaps that's a good thing. Our economy will have much more integrity if it finds success through hard work, rather than by winning the lottery.

    The worst thing that could happen to the economy would be to create another housing market bubble created by feelings of entitlement, rabid Realtors, absentee government regulators and lax lending practices. America needs to learn from its painful mistakes the intended lesson of humility. Even back in 1863, President Abraham Lincoln was trying to impart this perspective to the American people:

"We have been the recipients of the choicest bounties of Heaven. We have been preserved, these many years, in peace and prosperity. We have grown in numbers, wealth and power, as no other nation has ever grown. But we have forgotten God. We have forgotten the gracious hand which preserved us in peace, and multiplied and enriched and strengthened us; and we have vainly imagined, in the deceitfulness of our hearts, that all these blessings were produced by some superior wisdom and virtue of our own. Intoxicated with unbroken success, we have become too self-sufficient to feel the necessity of redeeming and preserving grace, too proud to pray to the God that made us!"

    As I write this, unemployment numbers are coming in. The verdict: The national jobless rate has sputtered out around 9.5-percent for the second month in a row. In July, private employers added 71,000 jobs. While adding any number of jobs is better than the alternative, at least 200,000 additional jobs are needed every month to result in a decline in the unemployment rate.

    Therefore, some people are finding work, but many borrowers remain underemployed. This reduces homeowners' abilities to pay their current mortgages and limits the number of homebuyers who can qualify for a loan. So, distressed properties are still being added to the market and many vacant ones are not finding buyers, just not as exasperatingly as before.

    This month's Market Report is simply a reminder that our financial environment looks a bit different than it did five years ago, and it may for a while to come. To those who are putting off making a desirable change because you are waiting to sell your home: Don't. You only live once, and there's no telling when prices will substantially rebound. To buyers who are looking to finance property that is beyond your current and long-term means: Don't. Peace of mind is worth much more than excess square footage.

    By April 2010, Fannie Mae, the mortgage giant which, in Sept. 2008, dealt the finishing blow to the housing bubble, was already encouraging those who lost homes in short sales or through deeds in lieu of foreclosure to get back into the housing market sooner. Rather than make them wait the typical four years to be cleared for a Fannie Mae loan, now they only have to wait two. Also, according to Bank of America, jumbo loans (loans exceeding $417,000) rose over 10 percent from May to June. If Realtors can start to move some of those high-end homes it could be a good sign for recovery, but Lord, I hope we've learned to live well within our means.