Economy can't bounce back until housing improves

Profit Confidential recently reported that until the housing market stabilizes, the U.S. economy will not see a sustained recovery. A main indicator of the current economic climate is job growth, and that sector will remain stagnant until the construction industry, housing industry and real estate market show signs of significant improvement.

According to Profit Confidential's Michael Lombardi, a bankable economic recovery is years off until housing prices stabilize.

"And that's why we simply continue to be in a bear market rally - a period in which the stock market moves higher as the bear completes its Phase II cycle of luring investors back into the stock market before stock prices fall again," Lombardi said.

One initiative to help stabilize house prices and increase consumer spending is for the federal government to buy mortgage-backed securities to free up lending capital for mortgage servicers. Recently, the Obama Administration and Fannie Mae discussed efforts to get more private mortgage investors to purchase these bonds, which would have to produce double-digit yield to entice the investors, MarketWatch reported.

Chris Flanagan, head of U.S. mortgage and structured finance research at Bank of America, told the news source that in order to attract private buyers, Fannie Mae and Freddie Mac would have to offer more than 10 percent yields to buy unguaranteed securities, as they would be the first to take a loss if the mortgages result in default.

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