Last week, Ben Bernanke declared the recession was probably over.
Bloomberg (on September 17) reported housing starts were up by 1.5% during the month of August led by multi-family dwellings.
So is the recession over? Has the housing market recovered?
Not if you examine what’s driving the reported facts.
In the September 15, 2009 issue of “The Wall Street Journal”, an article titled ‘No Easy Exit for Government as Housing Market’s Savior’, the driving force of this ‘recovery’ is revealed.
In the article, Peter Lansing, president of a mortgage firm called Universal Lending, comments on how dependent the housing sector has become on the US Government. At the height of the real estate boom, Lansing reported about 20% of the mortgages written by his company were backed by the Federal Housing Administration. Today, FHA accounts for over 80% of his business.
Mr. Lansing’s assessment is backed up by statistics compiled by “Inside Mortgage Finance”, a trade publication for the mortgage industry. The publication recently reported over 80% of new mortgages received some type of government support.
So, what would the housing market look like if the government stepped back and limited its involvement to levels prior to the financial meltdown that began a couple of years ago?
Presumably a lot worse.
One other point. Multi-family dwellings led the way, not single family homes.
That’s telling as well.
I’m not jumping on the recession is over bandwagon yet. I think there may be more economic distress to come. Assuming I’m right, the Bernanke video declaring that the recession is probably over is destined to become a You Tube classic.
Stay tuned.
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