When will the economy recover?

The Question that everyone asks is ‘When will the economy recover’?

Here is my assessment.  There are many events that will hold back an economic recovery.  In my view one of the biggest is the long pipeline of housing foreclosures glutting the market with houses owned by banks looking to unload them at bargain prices, as well as the steady pace of new foreclosures feeding that pipeline.  It is anticipated that more than four million vacant or soon to be foreclosed homes will come onto the market over the next few years.  Those foreclosures continue to push home prices lower.

We hear that builders are struggling to compete with deeply discounted foreclosures and short sales.  A Short sale occurs when lenders allow homes to be sold for less than what is owed on the mortgage.  Fewer homes are selling due to fewer qualified buyers and stringent mortgage underwriting.  Renting has become a preferred option for many Americans who lost their jobs during this recession and were forced to leave their houses.

All of these events contribute to home construction and sales being in the midst of one of its worst years ever.  Demand for new homes is weak. Record-low mortgage rates and plunging home prices have done little to help.  So the decline in construction contributes to the failure to create jobs and the rippling effect on those businesses that are involved with the construction industry.  What a vicious web we have spun and no clear answer in sight.