Will the housing market recover?

Most people are looking for security in their lives, and I don't mean security from the "terrorists". People are looking for job security, income security, health security, and financial security. Contrary to the beliefs of some politicians, most people don't want to be entrepreneurs (after all 50% of small businesses fail in the first five years). Most people would rather have a stable job with a decent salary and decent benefits.

Unfortunately, people don't have security in any of these areas. With the real unemployment rate running close to 15%, many people are worried about loosing their job. With the under-employment rate (working at a job below ones skills or training) close to 20%, there is very little income security. Workers are reluctant to ask for a raise with so many people wanting to take their job. There is very little health security. Most health insurance is tied to the job, so if you are worried about your job, you are worried about your health insurance. Also, premiums and deductibles have risen dramatically in the last few years, so a major illness may also be a financial nightmare even with insurance.  People have very little financial security, having seen declines in their home values, their retirement accounts, and their mutual funds. Many people are concerned they won't be able to retire as planned.  Can you say Wal-Mart greeter?

In the past, most people expected small annual increases in their pay that would at least keep up with the cost of living. Homes generally increased in value about the same as the rate of inflation. If you lost a job or got transferred, you could sell their house and bank the equity.

This is no longer the case. If you owe more on your house than it is worth, a major illness, a job loss or a job tranfer may also result in a foreclosure. Instead of being an asset, a home may now be a dead weight that could cause financial ruin. The obvious choice for most people is to rent, at least until they regain some security in their lives. So, if we are waiting for the real estate market to lead the recovery, we may have a long wait. I don't believe the real estate market will recover until the economy recovers.

Guest Author Randy Kelly is a Mortgage Banker and Finance Author with Peoples Mortgage and a regular contributor to VanEd News. Find all of his posts at VanEd.com/NewsLog

Written and Published by: VanEd



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