BluefoxToday blog : Housing market needs more demand

Housing market needs more demand

It's pretty much basic economics that troubles the current real estate market. Too many homes for sale and not enough buyers approved for a mortgage chasing the inventory. Supply and demand are simply out of sync.

The still increasing weight of foreclosures is a big contributor to this imbalance. That is especially acute in states that have absorbed the heaviest damage from mortgages in default, namely Arizona, California, Florida and Nevada. All in all, it is now a nationwide phenomenon.

There are two distinct reasons to that. Banks, the term includes home loan servicers and investors who own mortgage-backed securities, have been incredibly reluctant to focus much attention to the growing problem, namely extending a helping hand to homeowners in distress. It plain looks like they have acted, and still do, against their own best interests.

Washington has crafted several programs in the recent past to do something about it, but the efforts have been half-baked and poorly designed. The attention has largely been on keeping Wall Street from disappearing under the foaming waves of market forces, which doesn't do anything to spur real estate demand, even if the much-criticized industry will eventually be hauled back up on deck. 

Stemming the supply of additional foreclosed homes entering the market would bring along a major correction to the current disparity. Some of that may soon be a reality. A major shift appears to be in the works from the government, proposed by the Obama administration. The fresh mammoth plan making its rounds on Capitol Hill would put added emphasis on helping struggling homeowners and it appears to have more bite to it than the earlier ones. More accountability, more direction.

Washington is going for more, though. That's good. To boost the demand side, a new bill that gives homebuyers a tax credit of $15,000, or 10% of the home's value, whichever is less, is also being debated and massaged. Details won't be known for another few days, but the aim is right.

Of course these measures alone will hardly solve the industry's problems all at once, but they would definitely give it a nice confidence shot in the arm.



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 18 commentsEsko Kiuru • February 07 2009 10:38PM


It is hard to imagine demand rising as layoffs are looming.  I think there is a major fear component keeping buyers out of the market.

Posted by Jim Crawford, Jim Crawford Atlanta Best Listing Agents & REALTOR (Maximum One Executive REALTORS®) about 11 years ago

I think its worth it and a step in the right direction.

Posted by Christine Reams (Austin Title Company (512) 459-7222) about 11 years ago

I think we have to try anything right now to boost this real estate economy.  Thanks for the post!

Posted by Cindy Crutcher, Real Estate Broker - Exit Realty Crutcher Lawrenceburg KY (Lawrenceburg KY Foreclosures & Government Owned Properties) about 11 years ago

Helping people stay in there homes is great.  But what is happing to help underwater people sell so they can relocate, retire, etc....

Inventory does need to be reduced, existing homes need to be sold.  We do not need new development.

Posted by Jim Bishop (Morgan Stanley) about 11 years ago

Yes, we need less inventory and more approved mortgages. The federal government needs to be more proactive in regards to how bank bailout money is used. At this time the bailout money is not helping distressed homeowners.

Posted by Steve Zarry, Austin Central Texas, Real Estate (House Buying Now) about 11 years ago

Esko: I'm seeing demand pick up. Granted, it's often based on other's misfortune (short-sales, etc.) but I think we're at or near the bottom and poised for a real estate recovery. It will be slow and may not gather speed until next year but I feel it coming. I hope you're enjoying your weekend!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) about 11 years ago

We can also work on the supply side issue.  Too many homes still going to foreclosure instead of intelligent loan modifications being done.

Posted by Loan Survivor Real Estate Financing Expert (Purchases, First Time Buyers, Pre-Approvals, Refinance) about 11 years ago

Esko... what I fear about the whole stimulus package is that it has a lot of fluff in it... there are many that say that this will make us fail quicker than it will help us. The new $15,000 tax credit?  People still need money to buy. Sure this will help some, but I don't think it will help enough. Sure, we can argue that anything can help, but as some experts have mentioned, this could also push us into a great depression much quicker. I just think we need to evalute this stimulus bill much closer, before we approve it. I came up with an idea in this post...  : Do we run our country like a business or as a soup kitchen?

Overall, I agree, we need to create more buyers to pick up the left over homes on the market due to foreclosures. But I don't think it will truly work with this new stimulus bill.... Just my opinion.

jeff belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) about 11 years ago

Esko, your initial statement was short but right on the money, to many houses and not enough buyers.  The $7,500 did not motivate First Time Home Buyers as much as they hoped it would, let's hope that the new $15,000 one will have a different outcome.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 11 years ago


The weak economy certainly is a hindrance here.

Posted by Esko Kiuru about 11 years ago


Yes, we need to keep looking for solutions.

Posted by Esko Kiuru about 11 years ago


This new administration may have some fresh and useful ideas.

Posted by Esko Kiuru about 11 years ago


Underwater homeowner situation is a tough one, the only viable solution likely to be to lower the mortgage balance.

Posted by Esko Kiuru about 11 years ago


Easing mortgage guidelines some would be a big help.

Posted by Esko Kiuru about 11 years ago


I, too, am hearing that there are pockets all over where the real estate market is picking up. Let's hope it'll steadily gather steam, although probably slowly. 

Posted by Esko Kiuru about 11 years ago


What really is bothersome is how short-sighted many lenders are in handling foreclosures.

Posted by Esko Kiuru about 11 years ago


The stimulus package, as time will show, seems to have a few weaknesses. What I hope, though, is that when Washington spots them they can quickly admit to them and then come up with a useful fix. No plan is perfect, the key is to adjust as needed.

Posted by Esko Kiuru about 11 years ago


We have to keep on trying until we get the right cure.

Posted by Esko Kiuru about 11 years ago