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The U.S. finally has moved beyond attention-grabbing predictions from housing "experts" that housing is bottoming. The numbers are now convincing.
Nearly seven years after the housing bubble burst, most indexes of house prices are bending up. "We finally saw some rising home prices," S&P's David Blitzer said a few weeks ago as he reported the first monthly increase in the slow-moving S&P/Case-Shiller house-price data after seven months of declines.
Nearly 10% more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months' worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.
The reduced inventory of unsold homes is key, says Mark Fleming, chief economist at CoreLogic, a housing data-analysis firm. For the past couple of years, house prices have risen in the spring and then slumped; the declining supply of houses for sale is reason to believe that won't happen again this year, he says.
Builders began work on 26% more single-family homes in May 2012 than the depressed levels of May 2011. The stock of unsold newly built homes is back to 2005 levels. In each of the past four quarters, housing construction has added to economic growth. In the first quarter, it accounted for 0.4 percentage points of the meager 1.9% growth rate.
"Even with the overall economy slowing," Wells Fargo Securities economists said, cautiously, in a note to clients, "the budding recovery in the housing market appears to be gradually gaining momentum."
Economists aren't always right, but on this at least they agree: A new Wall Street Journal survey of forecasters found 44 believe the housing market has reached its bottom; only three don't. (The full results of the Journal's July survey will be released at 2pm ET)
Housing is still far from healthy despite the Federal Reserve's efforts to resuscitate it by helping to push mortgage rates to extraordinary lows: 3.62% for a 30-year loan, according to Freddie Mac's latest survey. Single-family housing starts, though up, remain 60% below the 2002 pre-bubble pace. Americans' equity in homes is $2 trillion, or 25%, less than it was in 2002 and half what it was at the peak. More than one in every four mortgage borrowers still has a loan bigger than the value of the house, though rising home prices are reducing that fraction slowly.
Still, the upturn in housing is a milestone, a particularly welcome one amid a distressing dearth of jobs. For some time, housing has been one of the biggest causes of economic weakness. It has now—barely—moved to the plus side. "A little tail wind is a lot better than a headwind," says economist Chip Case, the "Case" in Case-Shiller.
From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses. "Manufacturing had led growth and construction had lagged," JPMorgan Chase economists said last week."Now the roles are reversed: Manufacturing growth has slowed as private construction comes to life."
Plenty could go wrong. The biggest threat is a large shadow inventory of unsold homes, homes which owners won't put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders. They have been trickling onto the market, slowed in part by government efforts to delay foreclosures; a flood could reverse the recent rise in prices. Or the still-dysfunctional mortgage market could get worse. Or overly zealous regulators or a post-election change in government policy could unsettle mortgage lenders or home buyers.
The folks over at WSJ are showing their true colors. This article is most likely another attempt to drum up some consumer confidence and boost home sales. The evidence they site barely supports their own conclusion.
1. A single month's uptick in the Case-Shiller Index does not mean a recovery.
2. "The stock of newly built homes is back to 2005 levels." so they're still overbuilt?
3. Wells Fargo: "Overall economy slowing" yet "budding housing recovery." How does that work?
4. "Housing still far from healthy...." Yes, everything in this paragraph confirms that but regardless "rising home prices" will still keep the heart beating?
Every 'expert' quote has been spun to meet the conclusions of this article. There is nothing of substance to back up any of these claims and yet the article ends stating the bust is over.
Read through some of the comments on this forum and you'll see many discussions from realtors and buyers experiencing the low inventory, rising prices, and multiple offers. Working in this industry, it certainly feels like things have changes a lot in the last 6 months.
And I agree with the last comment that plenty of things can go wrong. If we do see a big release of bank owned inventory, that can push it back down. But banks have gotten a bit smarter about trickling out inventory to keep from crashing the market.
None of that changes our unemployment rate, household debt burden and increasing taxes. You know the banks are holding on to inventory, yet you think that will have anything but a negative impact? Bank owned properties deteriorate quickly, only adding fuel to the fire.
What is your market? I have a feeling these abundant multiple offer scenarios realtors like to site are most likely for REO's listed at teaser prices.
Hey, if you don't want to buy now, don't buy now but don't tell us we are wrong. Facts are facts and the fact is that in a significant number of markets around the country, inventory is down, demand is up, and prices are beginning to rise. No one is guaranteeing that the trend will continue ad infinitum--this is simply a report or observation regarding where we've been recently and a guess about what will happen in the near future. If you are a buyer and you choose to ignore all this, you are probably going to end up spending more than you need to because you are going to follow the market all the way up.
Hey, if you don't want to buy now, don't buy now but don't tell us we are wrong. Facts are facts and the fact is that in a significant number of markets around the country, inventory is down, demand is up, and prices are beginning to rise. No one is guaranteeing that the trend will continue ad infinitum--this is simply a report or observation regarding where we've been recently and a guess about what will happen in the near future. If you are a buyer and you choose to ignore all this, you are probably going to end up spending more than you need to because you are going to follow the market all the way up.
.... and, of course, as a realtor, you have no 'dog in the fight' (??)
None of that changes our unemployment rate, household debt burden and increasing taxes. You know the banks are holding on to inventory, yet you think that will have anything but a negative impact? Bank owned properties deteriorate quickly, only adding fuel to the fire.
What is your market? I have a feeling these abundant multiple offer scenarios realtors like to site are most likely for REO's listed at teaser prices.
Actually, I'm looking at this from a buyer perspective as I try to help my buyers get a house. The multiple offers that I"m seeing are happening on properties that are move-in ready and at market price and higher than the average sales price for my city. No, they aren't anywhere near the peak prices, but higher than last year. When something nice is listed, there is literally a line of agents with buyers waiting to get in to see it.
Real estate is LOCAL. What's happening here might not be happening where you live. But it's certainly happening here and from what I read, in a large number of other locations.
I'm in no way pushing anyone to buy or sell...just relating what's going on.
Housing has picked up in my city and neighborhood. There are 6 lots about to be built on with 400k+ homes and used(250k-700k) inventory is very low. It hasn't been like this since 2006.
.... and, of course, as a realtor, you have no 'dog in the fight' (??)
Correct. I don't and your comment clearly reveals your lack of understanding of what we do and how we do it. We agents don't determine pricing, the market does. The data we utilize come from what buyers and sellers have already decided between themselves. Agents have nothing to do with setting prices. We make buyers and sellers aware of what others have already done and what other options exist that might affect pricing. Buyers and sellers then decide what to do from that point. We can't fake the history, it is there for all to see.
At least in my neck of the woods (Central Florida/Orlando suburbs), homes priced correctly are moving very quickly.
In my own subdivison, including our home. 4 homes listed in middle of May (ranging from $460-620k) were under contract within 30 days of list date with no reductions in pricing and all under contract for at least 96% of original list price (we all know each other and are closing in the next 2-3 weeks).
Is this a head fake? I don't know. Inventory is low. And as the other poster stated if it's move in ready and priced right the home will sell.
Prices are holding steady at late 2003 levels. Hey it's not peak early 2006 levels but at least it's not 2000 prices, which isn't bad for one of the worst hit areas of the housing burst.
Even the banks have jacked up foreclosure prices. A similar foreclsure home is listed 10% higher than almost same identification foreclosure 6 months ago. Same neighborhoods. Same condition.
Short sells are still where the best deals can be had. Short sells are actually selling lower than foreclsure prices because I think people under list them on purpose and make the banks eat the losses and attract buyers quicker.
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