Money Minute: What's Behind the Stagnant Housing Market?

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The housing crisis ended several years ago, but millions of Americans are still stuck in homes they can't unload.

Nearly 10 million homeowners are still "underwater" -- meaning their mortgage debt is greater than the value of their homes. Online real estate company Zillow (Z) says the number is well below the peak level, but it's a major drag on the overall housing market. In addition to those who have negative equity, another 10 million or so haven't built up enough home equity to pay the costs of moving up to a new home, so they're stuck in place. As a result, the inventory of homes for sale is very low, and that's creating a stagnant housing market.

Millions of Americans have signed up for the do not call list, but we all know it's a far from perfect system for avoiding annoying phone solicitations. But the government is cracking down on one big violator. Sprint (S) has agreed to pay a record $7.5 million fine for failing to honor consumers' request to leave them alone. The company paid a $400,000 fine three years ago for a similar violation. We'll see if the stiffer penalty is a more effective enforcement tool.

Banking-giant Credit Suisse (CS) has agreed to plead guilty to criminal charges in the U.S. It's the first bank to do so in more than a decade -- as prosecutors try to show that banks aren't "too big to jail." The company will pay a $2.6 billion fine after admitting that it conspired to help wealthy Americans hide assets and evade U.S. taxes.

Here on Wall Street on Monday, the Dow Jones industrial average (^DJI) gained 20 points, the Standard & Poor's 500 index (^GPSC) added 7, and the Nasdaq composite (^IXIC) rose 35 points.

Win or lose, California Chrome is set to cash in. After winning the first two legs of horseracing's Triple Crown, the thoroughbred could collect millions of dollars in stud fees. Experts say he's likely earn $25,000 for each foal produced, and he could father as many as 120 a year. After the Belmont Stakes next month, again win or lose, California Chrome is likely to retire from racing to avoid an injury that could jeopardize his next career as a stud.

-Produced by Drew Trachtenberg.


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pfjw

Good Lord!

How soon we forget.

* Using the house as a bottomless piggy-bank taking out long-term loans for short-term goods. Want that 55" TV? That big gas-guzzler SUV? Just sign a Home Equity loan.
* Relying on inflation to make the house cheap. I can buy any house today and it will absolutely be worth more tomorrow.
* Assuming that wages will also increase along with the price of housing. Not only will I make more money, but my house will be worth more also - so I can afford to pay back all those loans for all that crap that I purchased.
* Oh, and while I am at it, I will buy that oversize poorly built, hard to heat McMansion out in that distant suburb where I have to drive for a pint of milk on roads without sidewalks in areas not served by public transportation.... And perhaps even put in a pool.

Guys and gals - there are actual real-world limits to how much something can be worth - from a piece of property to those skills you have to sell on the job market. NOBODY held a gun to anyone's head when they signed the loan documents. And NOBODY guaranteed anything by way of inflation, wage increases or any other part and piece of the puzzle.

We have no one to blame but ourselves and nothing to point to but our collective greed. And that greed starts at the bottom with the house buyer taking on more debt that was ever reasonable to the banker sitting at the "top" figuring that no matter what, they will get paid back.

And without reference to political parties or any other handy target, individual greed and individual stupidities are what started all of it - that the political atmosphere was supportive of disaster has only a peripheral effect on the actual outcome. Sovereign nations do not have to spend within their income. Individuals *MUST* do so, or what we see today will continue forever. YIKES - it has, and it does. People have short memories and even shorter attention-spans.

May 20 2014 at 3:00 PM Report abuse +2 rate up rate down Reply
1 reply to pfjw's comment
Valerie

@ pfjw --- All the average person wants to know is: "How much is my monthly payment going to be?" They don't, for even one minute, give any thought to that massive debt they are signing up for --- UNTIL something happens (like job loss) and the house of cards they have constructed falls on their head.

As you commented, it took a lot of elements to create the present mess we are in. It isn't ALL government's fault, either. Most of the population has partied (on credit) like it was the Roaring 20's, and they thought the good times would roll forever.

Anyone, who has done any serious reading about the economic history of America could not fail to realize that the economy has predictible cycles. There is a boom-and-bust pattern that has repeated. About every 80 years, the economy crashes big-time. And, it has happened, again. 1929 (start of the Great Depression) to 2008-9. 80 years.

And, amazingly, people sit around talking about "when things return to normal". Unfortunately, what is currently happening IS normal. Hard times have arrived. Right on schedule.

May 20 2014 at 4:10 PM Report abuse +2 rate up rate down Reply
courson11

The Do Not Call law is worthless. The exceptions need to be eliminated

May 20 2014 at 1:16 PM Report abuse +3 rate up rate down Reply
jdykbpl45

How is it that the housing crisis is over when millions can't sell their house unless they take a loss?

May 20 2014 at 12:43 PM Report abuse +6 rate up rate down Reply
Valerie

It's not at all difficult to figure out "what" is causing the stagnant housing market. Yet, the MW "expert financial writers" seem unable to understand it.

1. Inflated bubbled up prices for shoddy cracker box houses built by illegal Mexican construction workers.

2. Millions of people with college degrees who are unemployed. Living on unemployment checks = can't buy a house.

3. Baby boomers (who were the biggest factor in the former big boom in housing sales) are not buying homes, any more. They are trying to unload the big houses they are already stuck with.

4. The current job market is flooded with low-paying part time jobs. Jobs, which used to pay a living wage, have gone bye-bye. Millenials, who are caught in this trap, are living at home with Mom and Dad. Throw in 50 grand of college debt, and these 20-somethings are unlikely to ever buy a house.

America is in the first phase of a new economic Depression. It is going to get a heckuva lot worse.

May 20 2014 at 12:41 PM Report abuse +8 rate up rate down Reply
trbgd

Sprint is just terrible

May 20 2014 at 11:35 AM Report abuse +2 rate up rate down Reply
clark8642

Credit Suisse should be forced to identify the 22,000 individuals who they aided in committing tax fraud and show how long they were defrauding us. The fines, penalties, and back taxes those folks will have to pay, along with being publicly identified as a thief, should serve as a lesson to everyone tempted to engage in white collar crime. I look forward to when those folks and the thousands aided by other banks are brought forward for their day in court.

May 20 2014 at 10:41 AM Report abuse +5 rate up rate down Reply
3 replies to clark8642's comment
tmlbtb

A great majority of people are paying more for rent than they would a mortgage. Banks are paying hardly anything for their government loans, while middle America is paying 4.75%. Whine about liberals, both sides of the aisle had a hand in this mess. The rich are being voted into these positions, and they aren't going to let go of the money. The train wreck isn't over, there is another one coming down the tracks.

May 20 2014 at 10:32 AM Report abuse +7 rate up rate down Reply
texastotenmom

with obamits failed administration n failed economy n housing markets foe the last 5 years ,there are blocks n blocks of closed n boarded up mini malls across america with "CLOSED OUT OF BUSINESS " sings on them n "FORECLOSED" signs on 3 out of every 10 houses~~wait till obamit is impeached in 2014. !!

May 20 2014 at 10:30 AM Report abuse +1 rate up rate down Reply
1 reply to texastotenmom's comment
sasha

Please larn how to create a sentence. Your message gets lost in the gibberish.

May 20 2014 at 11:16 AM Report abuse -2 rate up rate down Reply
1 reply to sasha's comment
texastotenmom

yea eye goins two larn inglesh sumday bkacjsasha ware u bee,s frum

May 20 2014 at 12:20 PM Report abuse -1 rate up rate down
Leroy Gd

The housing crisis is the result of bill clinton, barney frank and chris dodd with their push to have everyone own their own homes, even if they could not possibly afford it. We are still experiencing the Great effects of their social engineering. Too bad the numb nut lefty liberals still vote in these types of low life morons, as we all must suffer the outcome.

May 20 2014 at 10:26 AM Report abuse +5 rate up rate down Reply
3 replies to Leroy Gd's comment
sue60565

Good luck qualifying for a mortgage when you make 11.00 an hour.
Meanwhile investors have been grabbing up foreclosed houses and renting them back to the same folks who lost these houses in foreclosure.
The big winners in the housing meltdown have been the wealthy.

America needs affordable housing options. This is not the same as govt. subsidized housing but rather smaller homes under 400 sq.feet
designed to maximize space and provide shelter.

May 20 2014 at 10:20 AM Report abuse +1 rate up rate down Reply