A major, and continuing, part of the financial crisis relates to the struggling housing market. According to the National Association of Realtors, housing inventories are up slightly, possibly driven by those seeking to “trade up” in the “down market.” This could help signal (and fuel) a turn around in the housing market. However, credit remains difficult to obtain, and just as important (and unfortunate), home buyers (and sellers) are facing a difficult appraisal market, too. An interesting aside: All-cash sales are a remarkable 27% of all sales (10% is the more typical number), another indicator that banks aren’t fueling a recovery in the market. All-cash sales, of course, skip the need for mortgage approval (and appraisal).
Count me as a skeptic. It's pretty clear that government bailouts aren't working very well in this sector:
The $75 billion Home Affordable Modification Program, which originally sought to help three million to four million homeowners facing foreclosure, has resulted in only 168,708 permanent loan modifications in a year. That prompted, Friday, an expanded foreclosure-prevention effort, including wider efforts to forgive mortgage principal. ...
Keep in mind, the latest rescue plan follows unprecedented efforts to support housing. Besides the modification program, the government also has taken over Fannie Mae and Freddie Mac; created and prolonged a first-time home buyers' tax credit; and increased the role of the Federal Housing Administration, which in 2009 insured nearly 30% of single-family mortgages.
At the same time, the Federal Reserve has kept interest rates near zero while purchasing $1.25 trillion of mortgage-backed securities, bringing mortgage rates to historic lows.
For all this, the housing market still is badly wounded, even if prices have stabilized in some areas. Mortgage delinquencies have worsened for seven consecutive quarters, according to the Office of the Comptroller of the Currency, while delinquencies more than 90 days past due among prime borrowers increased 16.5% in the fourth quarter of 2009.