By Jim Belfiore, president, Belfiore Real Estate Consulting
We really love grabber headlines, don’t we? When we see them, we anxiously begin reading the story that follows. Often, the story ends up being a letdown, not living up to the headline.
Earlier this week, we ran a story in Dealmaker that originally was posted by The Huffington Post with the title “Wall Street setting up housing crash, activists warn.” The story was a top-seller with readers; many of you (and I) clicked on the headline to find out more about the supposed impending housing crash. The focus within the article was the claim floating bonds backed by rental homes was “‘eerily like’ those mortgage-backed securities that helped fuel the last housing bubble.” The article said the “activists” that made the claim were from housing and consumer groups, but they were not identified.
I hope you, like me, read the article with skepticism. The reality is the housing market is not heading for a crash. The housing market is like a full reservoir with a dam at one end that is ready to burst. Over the past year, the metro Phoenix area- population grew by more than 110,000 people, report economic prognosticators at Moody’s Analytics, and homebuilders constructed a mere 13,000 for-sale homes. Some apartments were also constructed, adding a livable supply, but with a “normal” for-sale and apartment home vacancy rate. We under built. And the residential market was not only under-built last year, it was under-built the year before.
It’s true several factors not limited to a lack of equity in existing homes and a lack of affordable housing in some areas have created a “soft” for-sale housing market in Phoenix, but a crash is not coming. The claim made in ‘Huffington Post’s’ article that the sale of mortgage-backed securities is fueling easy money for homebuyers like in 2008 is nonsense. In fact, loans are far more difficult to get currently than during any other period in the past 20 years. Loans are so difficult to attain today; loan underwriting is one reason the housing market is not performing to expectations.
