Offline“Housing has turned the corner...” is a popular headline across the country these days. Most economists agree that the housing market has turned the corner and is on the rebound; however a great many homeowners aren’t seeing that improvement in their situations.
Here are some of the economic numbers and impressions that contribute to the positive sentiment from economists:
• starts of new single-family homes are up.
• sales of existing homes are up.
• current forecasts are for 5 million existing home sales and 500,000 new home starts this year.
So, what’s the downside? First, all of these statistics are based on a housing market bottoming at extraordinarily low levels, historic low levels. The growth rate, which is below normal trends, is welcome, but it’s still not what it should be. Improvement is constant, but analysts predict it will take years for a full recovery. Pending home sales declined in December, but stayed above year-ago averages for 20 consecutive months. Of course, with prices still really low, the housing affordability index is still at record levels. “Distress” sales fell from 32% of sales to 24% by the end of 2012.
While the housing market is no longer considered to be a drag on the economy, it’s also not going to enjoy a spectacular recovery according to one analyst. It’s a matter of perspective, as buyers do enjoy the best housing affordability levels in many years. However, being able to afford a home and being able to qualify for a mortgage these days are two very different things. Lending is still very tight, and conventional loans are still requiring higher down payments. Fees are going up on government guaranteed loans, reducing what some buyers can afford as well.
Prices are starting to rise though. The National Association of Realtors says this is in large part due to falling inventories, as December 2012 inventory was almost 22 percent below the inventory available in December of 2011. These tight inventories are expected to spur more price rises in 2013.
There are still deals out there for investors, but they’re getting a little more difficult to locate.
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Well, 2012 may or may not be the end of the world as we know it, but one thing is perhaps certain: it’s the end of the ghastly price hemorrhages home owners have suffered since the real estate market crashed in 2007. Nationally, home prices have dropped about 35% since the housing bubble burst – in the hardest hits areas, 55% or more. Yet new reports from several real estate research firms signify that home prices are finally stabilizing. The data reinforces a notion already asserted by many an economist, real estate agent and Wall Street investor: that 2012 is the year of the bottom.
The National Association of Realtors reports that in the first quarter of 2012, the median existing single-family home price, or final sales price, rose in 74 of the 146 metro areas that the association tracks. In the fourth quarter of 2011, only 29 metro areas had showed price gains. In other words 51% of the major cities across the U.S. have welcomed price gains, most notably in areas where the energy industry helps fuel the economy (Bismarck, N.D. and Oklahoma City, Okla.) and in snow bird retirement haven Florida (Tampa, Cape Coral, Palm Bay, Sarasota). Areas still plagued by falling prices are Atlanta, Ga., Mobile, Ala., Reno, Nev., Seattle, Wash., and Kingston, N.Y.
“Given the steadily dwindling supply of inventory and notably higher listing prices that are being negotiated today, prices are expected to show further improvements in the near future.” Lawrence Yun, chief economist of NAR, noted in a statement.
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Housing inventory levels have been shrinking across the U.S., leading to bidding wars and modest upward pressure on prices in some areas. At the end of the first quarter, 2.4 million existing homes were up for grabs, nearly 22% less than last year. Completed home sales jumped 4.7% in the first quarter of 2012 and pending homes sales are currently up 12.8% since March 2011. As inventory levels continue to tighten, a recovery, however nascent, can begin to materialize, especially if lenders can offload distressed properties to investors.
The latest Fiserv Case-Shiller Indexes also report signs of price stabilization. David Stiff, chief economist at Fiserv, notes that non-price metrics like home sales volume, increased spending on home improvement and more multi-family construction indicate that the housing sector has bottomed. “We expect that home prices, which generally lag changes in sales activity by nine to12 months, will stabilize by the end of this summer and then rise at an annualized rate of 3.9 % over the next five years,” asserts Stiff in a statement.
Fiserv says the spring and summer selling season will be fueled predominantly by investors this year. NAR estimates that roughly one-third of all purchases are already investor-related. As rents continue to rise, first-time buyers and trade-up buyers will eventually follow, lured by the record affordability levels of home ownership, Fiserv predicts.
A third real estate research firm, CoreLogic, released its own data this week. Including distressed sales, U.S. home prices ticked down 0.6% from March 20122 to March 2012. However, from February to March they rose 0.6% in the first month-over-month increase since July.
“This spring the housing market is responding to an improving balance between real estate supply and demand which is causing stabilization in house prices,” notes Mark Fleming, chief economist for CoreLogic, in the report. “Although this has been the case in each of the last two years, the difference this year is that stabilization is occurring without the support of tax credits and in spite of a declining share of REO sales.”
Fleming points to Washington, D.C., New York City and Phoenix, Ariz. as examples of markets where recovery is already taking hold.
Despite the hopeful prognoses from these reports, it’s also crucial to note that housing is and should be viewed on a local level rather than nationally. As I have noted before, different markets will bottom and recover at different paces depending on a variety of factors this year, including the availability of local jobs and how fast foreclosures can be processed and reabsorbed into local markets.M.Brennen
http://www.doctorhousingbubble.com/wall-street-demand-for-rentals-reos-h...
"Every mania has a different story but the sentiment of “priced out forever” or “I have to act now” is back in vogue. Just because people realize something is going on doesn’t mean they’ll successfully navigate it."
Yes, we are starting to see the shift Dean is talking about.
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