U.S. Housing Market Is Showing Signs of Recovery say Analyst…

on Jul 19, 2012

The U.S. housing market has been on a steady downward slide since 2008 when the real estate bubble burst, with a resounding pop. It has seen dramatic lows, including a multiyear bottom in 2011. However, recent forecasts suggest that the slump is coming to an end and that the market is finally starting to recover.

Forecasts were made by three real estate economists participating in a forum, hosted by the National Association of Real Estate Editors on June 22. David Crowe, Lawrence Yun and Stan Humphries talked about the market’s outlook at a panel discussion.
According to them there are some positive signs, but the market still has to overcome certain obstacles to ensure that the positive trend continues. One major issue is negative equity. Zillow’s data shows that approximately one third of homeowners with mortgages owe more that what their homes are worth. Lagging foreclosure processing meaning that a chunk of foreclosed property will probably still come to market and tight lending standards are amongst the other factors preventing a speedier recovery.

The last couple of years saw the market falling into a deep trough and that will make the recovery even harder. Crowe, who is the chief economist and senior vice president of the National Association of Home Builders (NAHB), reminded of the full scale of the crisis.
!m[](/uploads/story/184/thumbs/pic1_inline.png)“Last year was the worst year on record for house sales, for 60 years of housing-sale info,” he said.

He added that NAHB’s forecasts show an increase in single-family housing starts this year over last – 434,000 last year to a projected 516,000, or a 19 percent increase.
Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors (NAR) said that there is also an increase in demand despite friction in the market. And with some of the biggest issues now being resolved, Yun said he “wouldn’t be surprised” if there is a 60-70 percent increase in housing starts next year or a 10 percent rise in home prices, stimulated by growing demand. He clarified that he doesn’t expect both to happen but there is a decent chance that one or the other would. Much will depend on lawmakers though, as the U.S. once again approaches its debt ceiling.

Zillow’s Stan Humphries is also optimistic about the chances of a recovery, which he believes, will start on a micro level – ZIP code by ZIP code. His expectations are based on collected data from recoveries in Miami, Detroit and Phoenix.
“It’s almost like a bacteria attacking a bad virus,” Humphries said. He added that the expected recovery won’t be L-shaped.

Despite the positive outlook, Humphries pointed out that there might be another housing bubble coming soon, caused by the rush of investment into the single family rental sector. Rental rates are rising, while home ownership is looking more attractive now, so the future of that sector of the market is uncertain with a danger that the rental market may become saturated with supply in some areas.
But the bottom line is that the market’s path downwards seems to have stopped and the picture looks much more optimistic than a couple of years ago. And if the lawmakers manage to reach a compromise on the most important issues there is a good chance that this recovery won’t be just temporary.


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