Housing Remains Shaky

By Kevin Grewal, editorial director at www.SmartStops.net

NEW YORK (TheStreet) -- Despite some recent encouraging indicators, It may be a little premature to believe that the real estate market has hit bottom.

To be sure, the housing sector got a boost when the most recent U.S. construction numbers was up unexpectedly and sales of new homes rose 11% to an annual seasonally adjusted rate of 384,000, the largest increase in the last eight years.

In addition, U.S. GDP for the second quarter of the year contracted at an annualized rate of 1%, much smaller than economists had anticipated.

Still, one must keep in mind that new home sales prices have plummeted 12% to a median of $206,200, mortgage rates have risen, credit markets are still tighter than they were during the past real estate boom, consumer credit is starting to feel the effects of a prolonged recession causing FICO scores to drop, and the ability to obtain home mortgages is still relatively difficult.

Additionally, the employment market is still not seeing much help as wary employers just aren't hiring. The final nail in the coffin came from the most recent data released by the Labor Department which indicated that Americans receiving unemployment benefits fell to 6.2 million from 6.23 million last week, suggesting that some are starting to run out of their unemployment benefits.

With this in mind, it is tough to say that the real estate market is in recovery mode because it is the consumer that will drive and sustain a recovery.