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No recovery until 2013?

By Judy Martel · Bankrate.com
Monday, November 28, 2011
Posted: 4 pm ET

The cure for the ailing housing market is time, and any signs of sustainable recovery won't come until 2013, according to a group of economists polled by Reuters.

Attempts to revive the market are being discussed, but the economists believe they'll do little to increase home sales, stave off foreclosures or get more money flowing through the economy.

Two of the more popular stimulus ideas include a proposal by the Federal Reserve to repeat its 2009 tactic of buying mortgage-backed securities, or MBS, to pump up investor confidence and increase the availability of credit by driving down interest rates. But many in the Fed believe they've already tapped out all their available resources to help and that there is little left in the toolbox. The Fed already holds $867 billion in MBS. And while lower rates would help homeowners refinance, only those with good credit have that option.

The other idea is reducing mortgage principal to allow more underwater homeowners on the brink of default to keep their homes. Home prices are continuing to fall because so many borrowers are walking away. Some of the 27 analysts polled say that a writedown program would cost the government too much and many taxpayers are offended that they will be paying even for those who can afford their mortgage but choose to default. Approximately 15 million homes are worth less than the mortgage amount, according to the New York Times.

It's a problem with many moving parts that includes stimulating the economy as well as the housing market. For the short term, it looks like we're in for more pain. 

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2 Comments
Wolverine
November 29, 2011 at 8:35 am

Why so surprised?

The "economists" have been stating there would be a recovery since about... oh... 2009. And then 2010. And then 2011. And then 2012. And then 2013. The vicious cycle continues on and on.