What Housing Recovery?

What Housing Recovery?

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The housing market junta wants you to believe that the brick-and-mortar sector is turning a corner in 2012.  A phrase lost in the scrambled economics of the Great Recession is suddenly re-emerging: “buyer’s market.”  With it pops up images of happy couples grinning wide while hugging their friendly neighborhood realtor.  Promotional TV spots from ReMax to Century 21 push the feel good giddiness of first time home buying, and for a few seconds you might begin feeling as if the recovery is already here and been-there-done-that.

In reality, that’s not the case for African Americans.

The Black home ownership rate dropped precipitously to lows not seen since 1990: 44.3%, according to the Bipartisan Policy Center. These rates were already low in comparison to Whites, but the recession bludgeoned them even further, with signs of buckling occurring several years before the official meltdown in 2008, particularly during 2004-2006 and in 2010. “While the housing crisis has hurt people of all races and ethnicities, it has been devastating for many Hispanic and black families,” read a March 2012 Economic Policy Program Housing Commission report. The crisis, according to researchers,   “… reduc[ed] their median wealth by one half to two-thirds and significantly increase[ed] the number of households with negative net worth.”

With most Black populations concentrated in urban areas, recent surveys by Zillow’s Real Estate Market Reports show depressing trends in terms of housing prices.  Nineteen out of the 30 largest metropolitan areas will experience a “bottoming out” of their housing values by the end of 2012. Atlanta, a city that is nearly 55% Black and considered one of the more attractive, natural socio-economic hubs of Black America, showed the steepest decline at 4.1%.

Yet, the so-called “housing recovery” train continues chugging along, with many experts and forecasters hyped by reports (like Zillows) which show home value increases of 2.1%.  Foreclosures are also declining to their lowest levels since December 2007, now at 5.8 out of every 10,000 homes compared to 5.5 out of every 10,000 back then.  How that makes much of a dent in perception kills any attempt at logic.  Clearly, economists and housing experts are grabbing for any upward (albeit small) trend they can find.

The worry here is the detachment from reality on the ground as housing “recovery” analyses appear to be out of sync with the actual economic climate.  It’s a bit difficult to grasp a recovery when the U.S. Census Bureau reports the national poverty rate is at a record high: 15%.  That’s the highest it’s been since 1965, and an independent, non-partisan, cross-ideological Associated Press survey of demographers and economists shows consensus that it will grow higher over the next few years.

Housing expert exuberance over a market making a slow turn for the better is understandable.  Realtors, builders and construction workers need jobs and a steady flow of income.  But, the problem occurs when that same exuberance ignores pressing details, such as the fact that over a quarter of the Black middle class evaporated during the recession or that Black unemployment is near double the official national average and the highest of all demographic groups.  Many African Americans are asking: what recovery?  And, how can you buy a home when the banks aren’t loaning any money?  Mortgage loans are way out of reach for a hammered Black middle class also struggling to regain positive credit ratings.  And when, unofficially, a quarter of the Black population is either unemployed, underemployed or exhausted from fruitless job searching, where’s the money for a down payment going to come from? Over enthusiastic projections may help push the housing market into positive territory for analysts and investors, but it’s not translating into anything very tangible for Black home owners and prospective buyers, most still living from paycheck to paycheck.  This is why the face of the commercialized recovery buyer is, for the most part, White.

Reviving home ownership is about much more than engineered and incremental drops in mortgage rates or offering unrealistic refinancing programs for unemployed families that have stopped paying their house note.   The National Urban League’s three-prong approach is a model the housing market should plug itself into: ensuring the economically dispossessed are accessing a national program of extensive foreclosure prevention, homeownership preparation and financial literacy.

The financial literacy component in and of itself is huge – it provides the necessary armor against a repeat of the Great Recession.  In many respects, the crisis presents an opportunity for African Americans to dramatically transition their communities from consumer-based paradigms to smart financial models.

Forecasts on the housing situation must granularly take into account the pain absorbed by underserved communities, particularly African American communities in major urban areas.  The housing crisis is still very real and very much in full effect, with lawmakers either unwilling or unable to offer any innovative solutions such as calling nationwide moratoriums on foreclosures and negative credit reporting for the unemployed.  The nation must not fall into the trap of false optimism before the real work is complete. Failing to do so gives the false impression that it’s all good … when clearly it’s not.

3 COMMENTS

  1. As long as a lender keeps a repossessed home on its books, it is allowed to value the home at the price that the foreclosed-on borrower originally paid for it. Once the lender sells the home, it must book a loss, which is the difference between the original purchase price and the price the home sells for.
    In other words, the lenders are “cooking the books” to make their bottom line look better. These false figures affect everything from governmental oversight to the stock price of the bank.

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