Housing: President should be positive as market recovers

“It would be a good move of President Obama to instill some confidence in the consumer that his job strategy is going to work,” he said.

“Housing is dependent on those consumers.” 

Consumer confidence hit an eight-month high in January, according to the Conference Board’s index of sentiment released on Tuesday, a key component to bolstering the market, Murin said. 

Although confidence is still below the 90 needed to signal a healthy confidence, the slight increase bodes well for the overall economy. Consumer spending accounts for about 70 percent of the economy. 

Also, home prices dropped 1 percent in November from the previous month and were down 1.6 percent from the same time a year ago, as the housing market continues adjusting, according to the S&P/Case-Shiller Composite index. Prices are expected to drop another 5 percent this year, bottoming out in the spring, according to RealtyTrac.  

But the key component to an improving the housing market is a steady decline in the unemployment rate that should push along the market, and provide the added confidence needed as people re-enter the workforce and are able to make purchases, he said. 

“At stake is whether new jobs and industries take root in this country, or somewhere else,” Obama is expected to say tonight. “It’s whether the hard work and industry of our people is rewarded.” 

David Crowe, an economist with the National Association of Home Builders (NAHB), said the economy needs to be adding about 200,000 jobs a month, according to his 2011 forecast. 

“Unfortunately the subprime mortgage crisis hit simultaneously with the rapid increase in unemployment,” Murin said. 

The more buyers means more construction and more jobs, about three to every housing start, according to Jerry Howard, president and chief executive of NAHB.

“If I could write Obama’s speech I would say that housing has led us out of every recession since World War II and it can be used a fulcrum to economy,” Howard said told The Hill.  

Housing starts were about 529,000 last year but Howard argued that “organic demand” is about 1.6 million to 1.8 million, showing the potential for about 3 million jobs. Those jobs would make a substantial dent in the 8 million lost during the course of the nation’s recession. 

With demand for housing down because of the economic downturn and high unemployment, lending also is “nonexistent,” Howard said. 

He questioned whether the housing market is stuck in a chicken-and-egg scenario — lending is bad because the market is still fragile or is the market fragile because lending isn’t happening. 

“We’ve consistently asked the administration to use the bully pulpit to push regulators to let banks lend money for building,” Howard said. 

He wants the administration push bank regulators to loosen up lending restrictions, what he considers an “overreaction to market conditions” a move that would surely spur development.  

Lenders should be serving the local markets based on the condition of that market and people asking for the loan, not based on a nationwide blanket policy that’s holding housing stagnant in areas ready to grow, such as the Midwest, especially with foreclosures concentrated in 11 states, Howard said. 

Still, Anthony Sanders, professor of real estate finance, George Mason University, said it might be smart if Obama avoids discussing housing at all. 

Sanders is making bets on whether Obama says “housing is stabilizing” or “mortgage delinquencies are stabilizing,” neither of which are the reality in the housing marketing right now.  

Foreclosures are expected to increase another 20 percent this year after a record 1 million repossessions in 2010, according to RealtyTrac, a California-based company that tracks the foreclosure market. 

“I am hoping that he doesn’t announce new initiatives to save borrowers that have defaulted on their mortgages or prevent future defaults, since these programs rarely work and are extremely expensive if they ever get sufficiently large in scale,” Sanders said. 

Sanders though said that most of his pessimism about housing stems from the growing deficits of many states and local governments, which is putting increasingly downward pressure on the economic recovery. 

“States and cities facing bankruptcy will have to cut expenditures and services which put downward pressure on housing demand,” he said. “Like Detroit. This is the 800-pound gorilla in the room and the president is likely to pretend it is not happening.”

The issue already has garnered some congressional attention, with House Majority Leader Eric Cantor (R-Va.) saying there won’t be a bailout for the states. 

Heading into Tuesday’s State of the Union address, Cantor showed no desire for increases in virtually any area of the federal government, and he doubled down on his opposition to new proposed spending on infrastructure and education, even in areas, like transportation, where he acknowledged there were deficiencies.

“I don’t think that that is necessary, because state governments have at their disposal the requisite tools to address their fiscal ills,” the majority leader said, before going a step further.

Russell Berman contributed to this story.