“The housing bust is over”, according to a recent Wall Street Journal article.
According to S&P’s David Blitzer “We finally saw some rising home prices.” Last month was the first month there was an increase after seven months of declines. More good news is that existing home prices have increased 10% from this time last year and the total number of vacant homes is at its lowest level since 2006.
With this declining inventory, experts are predicting that the normal slump experienced after spring’s busy selling season won’t happen this year because supply and demand will be about equal, even though that means six months worth of inventory sitting vacant.
This may be due to investors buying up and renting out a large number of the distressed properties. Another factor could be the Federal Reserve’s efforts to resuscitate the market through great interest rates which stand at 3.62%, and to top it all off there has been a recent rise in new home construction, with unsold inventory back up to 2005 levels. These newly built homes accounted for almost 0.5% of the total 1.9% increase in the first quarter growth rate.
“Even with the overall economy slowing, the budding recovery in the housing market appears to be gradually gaining momentum.” noted Wells Fargo Securities economists. “A little tail wind is a lot better than a headwind,” says economist Chip Case.
Housing, however, is far from healthy. There is a potential that a flood of shadow inventory could hit the market, causing the recent rise in home prices to plummet. Add to that the large number of borrowers whose loan is larger than the value of their house, and the fact that home prices have only risen to 60% of their pre-bubble starts of 2002 and you can see why this current situation is still very precarious.
After 7 long years of angst and all the things that could still go wrong today, we can now see concrete evidence that there is hope for a better tomorrow!
Source: Housing Passes A Milestone. The Wall Street Journal, July, 11, 2012