Halloween: What is Scaring Me?

This year, some of the most popular Halloween costumes are Elsa and Anna from Frozen and a Hazmat suit inspired by our current Ebola scare. The dichotomy of the innocence of Disney princesses with the macabre of a terrifying and, IMHO (ask your kids for translation) not very funny healthcare worker’s protection suit, can be an analogy for this holiday, this season and, as applicable to this email, the housing market.

In the housing arena, there are the Annas who see beyond the isolation that many have felt in losing their homes to foreclosure or seeing their equity stripped by the collapsing property values. Like Elsa in the ice castle, these people had been forced to relocate to a new home uprooting themselves from the former comforts they enjoyed. However, they persevere and begin a new life and see promise in the future. After several years on the sidelines either waiting for their credit to improve or the market to recover, they are ready to jump in again.

There are others, who are donning the Hazmat suit and think that this will protect them from the Ebola crisis (and analogously from further economic harm).  Though appearing optimistic about their prospects for survival, they are actually demonstrating a victimization and pessimistic view of the future.  They are giving into fear (perhaps by ironically pretending to poke fun at it), but not ultimately finding the way to thrive and move beyond their isolation.  So what is scaring me is that I would like to be like Anna and get joy out of just wanting to build a snowman. But, I find myself preferring to don the Hazmat suit and avoid the fall-out that I am afraid may be coming.

Many will argue that the housing market is doing well. They will note that the stock market has never been higher and that jobs are coming back.  They will also point out that interest rates are back at 4.0% now for a 30 year fixed and teasing us about going lower, which is true.  However, what I see other than at the very upper end of the housing market is an overall lack of either ability or inclination to purchase a house.

Many of those who are interested in purchasing a home are still suffering the effects of the past 6 years of the Great Recession.  This week alone, I spoke with half a dozen people whose credit scores were damaged by their inability to get a handle on their debt after job losses, foreclosures or a decrease in income.  For the past majority of people, they are doing better than they were 4 years ago (Ronald Reagan, where are you when we need you?), but a lot worse than they were 6-8 years ago. This is not a recipe for a strong housing recovery.

Recent statistics are showing that the average age of a homebuyer is now 31 years old This is several years older than it has traditionally been.  This is partially the result of choices being made by this younger generation after seeing what happened to their older co-workers, friends and parents. It also can be a lifestyle choice by those who prefer to stay flexible and unencumbered. But, it is also the result of the next generation not having the ability to save enough for a downpayment (even though we offer loans with only 3.5% down); the income necessary to support a home they would like to purchase; or a stable enough job to allow for a home purchase.

I believe that we are certainly in the upward swing in the housing market. But, the tepid recovery in most areas is not strong enough to bootstrap the rest of the economy and lead to the increased consumer confidence that we need.  I am afraid that if this does not change soon, the stock market gains will reverse themselves and we will be faced with a bit of a stagnant (though not necessarily declining) economy.  I am very concerned that the housing recovery is not nearly as deep nor as wide as it needs to be at this point.  But, to try to be positive, I will channel my best Elsa and hope that this will be the case as she sings in “Let It Go” :

And one thought crystallizes like an icy blast

I’m never going back, the past is in the past

Let it go, let it go

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