File this one in the category of “believe it when you see it.”

Remember when the government was going to help people with their mortgages?  I didn’t think it would happen. Well, I was wrong.  The government has helped them…all 31,000 of them:

http://www.breitbart.com/article.php?id=D9CGKQB02&show_article=1

In other words, this much hyped plan to help people hold onto their homes has helped only a handful of people in a country with tens of millions of homeowners.

This is another good reminder to not believe everything you hear from the government.  I continue to say “believe it when you see it.”

Today we end our series on housing by looking at the bright side.

There are simple steps that the government can take today to help turn around the housing market of tomorrow.

First, we need to slow down federal spending. If we don’t we are heading toward inflation, and that will make housing even more expensive and negatively impact the housing market. If we can slow down spending, we can help strengthen the overall economy, which will help strengthen the housing sector.

Second, we need to stop the process of encouraging loans for folks who don’t need them or can’t afford them. Subprime mortgages helped start this contagion. And we need to end that process.

Third, we need to provide incentives for home purchases. The first-time home owner’s tax credit should be extended, for example.

With these three steps, we could help speed up the recovery of the housing market and the entire economy.

Don’t take my word for it that the housing crisis is not over:

http://www.reuters.com/article/gc03/idUSTRE5B14TY20091202

Mark Zandi is the chief economist at Moody’s Economy.com. This week, he gave an interview to Reuters and predicted: “The housing crash is not over.”

Zandi noted that home prices in some areas have been going up. He thinks the reason for this is that foreclosure sales declined over the last few months.

“This lull in foreclosures sales has resulted in the price gains in the past few months,” he said.

Zandi also argued, as I do, that things will get worse, not better:

“Foreclosure sales will increase, and home prices will resume their decline by early 2010 as mortgage servicers figure out who will not qualify for a modification,” he said.

Today, the Federal Housing Authority will announce plans to protect its declining reserves:

http://online.wsj.com/article/SB125972834950872387.html

“Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, plans to ask Congress on Wednesday to raise the cap on the annual insurance premium that the FHA can charge borrowers. In testimony before a congressional panel, he will also outline steps the agency is considering to set minimum credit scores, to require home buyers to put more money down, and to make lenders more accountable for loans that the agency insures.”

Doesn’t that make you feel better about the housing market? Me neither. If FHA is going to start raising premiums on borrowers, how is that going to help the housing market rebound?

It’s not. That’s why I still believe the housing crisis is going to be worse before it gets better.

The Federal Housing Authority may be in trouble:

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/12/AR2009111210694.html

This is the federal organization that insures lenders against default. Yet according to this article, the FHA has a major cash flow challenge:

“The Federal Housing Administration’s cash reserves have shrunk to a level far below what is required by law, and the agency could need taxpayer funding if worst-case scenarios play out, according to an independent audit designed to measure the agency’s financial soundness.”

In other words, if the FHA can’t fix this problem on its own, you and I will be fixing it by paying for yet another bailout package.

This week, we will finish our series on the housing crisis and why it might get worse before it gets better. Included in our series will be information about how the Federal Housing Authority itself could be in trouble.

Toward the end of the week, we’ll provide some good news about when and why the housing market might start to turn around.

So check in each day this week as we tackle the housing crisis.

Here is how bad the housing market has become: bad news is now treated as good news.

http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/112509dnbuscaseshiller.c4f033.html

Home prices in the Dallas-Fort Worth area are down 1.2 percent from last year. Yet because the drop wasn’t bigger than that, it’s being treated as good news. It’s not.

“We have seen broad improvement in home prices for most of the past six months,” Standard & Poor’s David M. Blitzer said Tuesday in the report. “However the gains in the most recent month are more modest than during the seasonally strong summer months.”

Pardon me if I don’t get excited about more bad news about the economy. I’ll contain my enthusiasm until housing values actually go up, not down.

This week, we are continuing our blog series on the housing crisis facing America.

Today, we are focusing on another shocking statistic: vacancy.

http://online.wsj.com/article/SB10001424052748704538404574542021776119410.html?mod=googlenews_wsj

A huge number of houses are sitting empty. Historically, economic recoveries have been accompanied by strong housing numbers. But our vacancy number shows that we don’t have a healthy housing sector.

As the article notes:

“In the third quarter, about 14.2 million housing units, or a record 10.9% of all housing units, were vacant year-round.

The homeowner vacancy rate, measuring the percentage of owned units either empty or for sale, was 2.6%, near a high. Homeowner vacancy rates have averaged 1.4% in past recoveries from steep housing declines.”

So with so many empty houses, the talk from Washington about an economic recovery appears to be empty rhetoric.

So is the housing market back? I don’t think so. It turns out, more people are falling behind on their mortgages than they were a year ago:

http://apnews.myway.com/article/20091117/D9C18RSG4.html

As the article notes:

“For the three months ended Sept. 30, 6.25 percent of U.S. mortgage loans were 60 or more days past due, according to credit reporting agency TransUnion. That’s up 58 percent from 3.96 percent a year ago.”

And as we discussed in yesterday’s blog, the housing market is connected to other parts of the economy:

“Two things must get better before mortgage delinquency rates start reversing themselves, he said: home values and unemployment. ‘Until we see improvement in both of those areas, it’s possible that it will take longer for delinquency to improve,’ Guarrera [vice president of TransUnion's financial services division] said.”

So with unemployment at its highest level since 1983, don’t look for the housing market to pick up any time soon.

So the housing market is back, right? Not so fast.

Although recent news reports are hyping up some moderately positive housing data, one economic trend is often tied to other economic trends. So what does the rest of the economy look like?

http://online.wsj.com/article/SB125837665919850337.html?mod=djemalertNEWS

As the article notes: “U.S. retail sales increased 1.4% in October, above the 0.9% rise projected by Wall Street. The jump came on rebounding demand for cars, a sign the economy kept recovering despite climbing unemployment. Aside from automobiles in October, other sales rose just 0.2%.”

In other words, when you factor out cars, sales for other products were almost zero. And if folks aren’t buying inexpensive products, they likely won’t be buying expensive products like houses.

So don’t believe the hype. The housing “recovery” has not yet begun.

This week on our blog, we’ll be taking a look at the housing market. The media seems to think that it’s back. But I’m not so sure.

We’ll take a look at the numbers and compare them to last year. We’ll also look at the broader economic context to see if the conditions have improved enough to encourage consumers to buy homes.

So check back each day this week and to see if the housing market is really back in business.

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These are tough times for our nation’s economy.  I know first hand.  This week, my company, Advanced Trailer & Equipment, announced a one-month pause of trailer production.  This pause will allow us to determine expected demand and have a better understanding of our customers needs for the year.

In other words, what we are doing reflects our company’s strength, not weakness.  We have plenty of trailers to meet our customers’ needs.  But now we can use this time of plenty to plan ahead for the rest of the year.

That’s what’s so great about the free market.  People ask: how will things turn around in our economy?  They already are turning around.  Businesses are adjusting; the markets are responding.  For example, housing prices are down.  So guess what’s starting to happen?  People are buying houses.  Wal-Mart cut prices.  And guess what happened?  Wal-Mart recently announced huge sales numbers.  The free market works.

But that’s not the only reason the free market works.  It also works because of the people who work in it.  I found this out again this week when I met with my team to give them the news.  I told them the truth: that we didn’t want to initiate a pause in production but that we needed to since we had so many trailers in stock.  Without exception, each member of my team took it well and promised to “be back” once we open production again.  One man even thanked me for “telling us the truth.”  What great workers!  What great people!  Want to know why we in America have the best economy in the world?  Because we have the best people in the world.

I know the free market isn’t perfect.  But it beats any other system out there. Companies like mine will adjust and adapt.  And we will survive and prevail.  So will our economy…and so will our country.

-Randy Hill