Foreclosure Crisis

The Lehmann Letter ®

Today’s San Francisco Chronicle ran an excellent article by Carolyn Said on the housing market’s current state: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/05/26/MNRB17JFHB.DTL .

Its message: Don’t be too optimistic.

There are plenty of conventional reasons to fear weak demand, such as rising unemployment and tight credit. But what about an historical analysis that shows that homes remain overpriced despite their recent drop? Or that recent purchases by bottom-fishers present a distorted image?

The supply side has even greater problems: The end of foreclosure moratoriums, imminent mortgage-interest-rate resets, banks’ inventories of foreclosed homes and the large number of underwater homes.

Read this article to see why the foreclosure crisis continues to grip the housing market. Until that grip weakens, we can’t expect relief at ground zero.

© 2009 Michael B. Lehmann