Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Don’t Tell Me: More Troubles Ahead for the Housing Market?

Monday, November 26th, 2012
By for Profit Confidential

Let’s pause and reflect for a moment. What was the main issue that drove the U.S. economy into an economic downturn in 2008 (that is still taking its toll)? It was the collapse of the housing market. It crippled the U.S. banking system and brought a Great Recession into the U.S. economy that will be remembered for a long time to come.

Since then, the housing market in the U.S. economy has improved in small geographic pockets. But now, data are increasingly coming out suggesting more trouble ahead for the U.S. housing market.

According to RealtyTrac, foreclosures in the U.S. economy actually increased three percent in October compared to the previous month. The company also reported that one in every 706 houses in the U.S. economy was in the foreclosure filing process. (Source: RealtyTrac, November 13, 2012.)

The Federal Housing Administration (FHA), the agency which insures lenders against losses on their loans, is concerned about its reserves due to increasing mortgage delinquencies. The year 2013 could be the first time in 78 years that the FHA will need taxpayers’ money. The agency has 739,000 loans that are 90 days or more past due on hand—100,000 more than a year ago—representing 9.6% of all the loans it has guaranteed. The FHA has guaranteed $1.08 trillion worth of loans. (Source: Wall Street Journal, November 14, 2012.)

As I have been saying for some time now, my research shows it has been investors fuelling the housing market. Investors are buying troubled properties, fixing them up, and renting them out to tenants. The U.S. housing market, and the U.S. economy for that matter, will only start to bounce once there is an influx of real homebuyers. (Also see: Think There’s a Recovery in the Housing Market? Think Again.)

What He Said:

“I personally expect the next couple of years to be terrible for U.S. housing sales, foreclosures and the construction market. These events will dampen the U.S. economic picture significantly in the months ahead, leading to the recession I am predicting for the U.S. economy later this year.” Michael Lombardi in Profit Confidential, August 23, 2007. Michael was one of the first to predict a U.S. recession, long before Wall Street analysts and economists even thought it a possibility.

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Michael Lombardi - Economist, Financial AdvisorMichael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Some of the stock recommendations in Michael's various financial newsletters have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter or Add Michael Lombardi to your Google+ circles