Housing Market Far from Recovery, According to Leading Financial Newsletter Profit Confidential

In the second quarter of 2012, the largest jump in home prices in seven years made the major news sources stand up and take notice, reviving predictions of the bottom in the housing market; however, according to Michael Lombardi, lead contributor to Profit Confidential, less attention was paid to another critical aspect of the housing market that will keep it far from recovery.

In the article “Think Housing Is Safe Again? This Will Change Your Mind,” Lombardi says that the reality is that 11 million mortgages in the housing market (24% of total home mortgages outstanding) are underwater—the mortgage is higher than the value of the home in today’s prices.

“If we look at the number of homeowners who have equity of 20% or less in their homes (value of home in excess of mortgage), we capture another 25% of all mortgages outstanding,” explains Lombardi. “These homeowners don’t qualify for the 20% or more equity required as a down payment to trade up homes.”

In addition, Lombardi notes that the number of homeowners who are at least 30 days late on their mortgage payments has increased to 6.5 million.

“There are millions of homes that have still not been foreclosed on that will add to the supply of homes over the next few years,” says Lombardi. “Basically, close to half of all mortgages in the U.S. housing market are held by homeowners who are basically stuck.”

Lombardi believes that until this housing inventory is cleared out and the U.S. homeowner feels comfortable to buy and sell again as in the past, there is no way there can be a sustained housing market recovery.

“As soon as home prices rebound and as soon as there is actual demand in the housing market, what do you think these homeowners will do?” asks Lombardi. “They will sell, which will continue to put pressure on home prices and the housing market in general.”

Profit Confidential, which has been published for over a decade now, has been widely recognized as predicting five major economic events over the past 10 years. In 2002, Profit Confidential started advising its readers to buy gold-related investments when gold traded under $300 an ounce. In 2006, it “begged” its readers to get out of the housing market…before it plunged.

Profit Confidential was among the first (back in late 2006) to predict that the U.S. economy would be in a recession by late 2007. The daily e-letter correctly predicted the crash in the stock market of 2008 and early 2009. And Profit Confidential turned bullish on stocks in March of 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.

To see the full article and to learn more about Profit Confidential, visit www.profitconfidential.com.

Profit Confidential is Lombardi Publishing Corporation’s free daily investment e-letter. Written by financial gurus with over 100 years of combined investing experience, Profit Confidential analyzes and comments on the actions of the stock market, precious metals, interest rates, real estate, and the economy. Lombardi Publishing Corporation, founded in 1986, now with over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more on Lombardi, and to get the popular Profit Confidential e-letter sent to you daily, visit www.profitconfidential.com.

Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.