The REO (Real Estate Owned) to Rental Industry is about to explode with an onslought of reposessed homes turning into rental property. Here’s the story from CNBC News…
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The long-awaited housing recovery is beginning to blossom, according to industry experts taking a look at recent existing-home sales.
Paul Dales, chief economist at Capital Economics, says “it is clear that a housing recovery is now well underway.”
Lawrence Yun, chief economist for the National Association of Realtors (NAR), concurs with Dales’ assessment, saying “The pattern of home sales in recent months demonstrates a market in recovery.”
The evidence: home sales have been on the rise for the past three months, posting a 5 percent increase in December.
In addition to the 5 percent increase in December, NAR reported a 1.7 percent annual increase in existing-home sales in 2011, a total of 4.26 million homes for the year.
Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.
“The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future,” Yun said.
However, listed inventory is only part of the equation, and according to CoreLogic’s latest numbers, shadow inventory stands at about 1.6 million.
Regardless, Dales believes sales will rise this year. “Housing still won’t contribute much to GDP growth over the next few years, but at least it will no longer subtract from it,” Dales says.
Home prices have slid more in the past 5 years than during the great depression, so what’s up now for home prices going forward? Rich DeSalvo has these thoughts on a Fox News interview…
Questions or comments about this interview? Post your comment or question by clicking the “comment” link below…
Most of the good news relates to the overall economy, but there are glimmers for housing too.
The Commerce Department recently reported that new home sales rose 5.7% in September to a 313,000-unit annual pace. This is up from 296,000 in August, and larger than the 300,000-unit number that many economists projected. Data through August 2011, released in late October by S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed increases of .2% for August versus July in major cities.
It is also noteworthy that these modest improvements are occurring during a period of very tight mortgage lending standards. When those standards return to more traditional levels we’ll see more buying activity. Unfortunately the large inventory of distressed properties continues to hold down the housing recovery. Sales remain slow largely due to our weak economy, and overall housing prices are likely to drop again in 2012.
Despite the bad part of the news more economists are coming to believe that we’re at or near the bottom of the housing market. The Administration’s recently announced changes to the HAMP program should also help, although the limited success of earlier HAMP initiatives suggests we shouldn’t expect any miracles. There’s also nothing to suggest that the current low mortgage interest rates will face significant inflationary pressures in the near term. Also encouraging is that home ownership still remains a popular goal despite a decline in housing values than began five years ago. Hanley Wood’s Housing 360 Survey recently revealed that 89% of owners and 59 percent of renters believe home ownership is important to the American families. One third of renters and about 20% of existing homeowners believe it’s a good time to buy a home and plan to buy a home in the next two years, according to the survey.
The Commerce Department recently reported that the economy grew 2.5% in the third quarter, not enough to suggest a roaring recovery, but enough to demonstrate that the economy isn’t backsliding. Spending by consumers also grew, reinforcing that conclusion. There’s good reason to believe that recovery of the housing market can begin if other economic factors turn positive.
More recent signs for the overall economy are encouraging, and could contribute to the recovery of the housing market next year. The stock market has done well in recent weeks, buoyed by progress in Europe to address its debt woes. New orders for durable goods rose 1.7% last month. Orders for nondefense-related capital goods increased 2.4%. These are indicators of business investment and typically presage new job creation.
Significant challenges still remain. The Hanley Wood survey also revealed that many homeowners and renters are in no great hurry to buy because of the soft economy. If Congress fails to make significant progress on reducing the deficit, a real possibility, the stock market and consumer confidence could plunge. Most economists believe the nation needs a sustained growth rate of about 3% before we start generating the new jobs that will be critical to the recovery of the housing market, and we’re not there yet. Still, there are enough positive signs at this point that next spring could be the turning point for the US housing market.
The housing market, which has struggled with an oversupply of homes for years, faces a new problem now: a lack of attractive inventory.
There were more than 2.19 million homes listed for sale at the end of September, down 20% from a year earlier, according to a new report from Realtor.com. That is the lowest level since the company began its count in 2007.
The report is indicative of how the U.S. housing market just can’t seem to catch a break. While falling inventories normally are a sign of health, because reduced competition can boost prices, that isn’t the case right now.
Instead, people are pulling their homes off the market rather than try to sell them at today’s discounted prices. At the same time, banks have been more slowly moving to take back properties through foreclosure ever since processing irregularities surfaced last fall, temporarily reducing the supply of foreclosed properties. The shrinking supply isn’t driving up prices because demand is soft.
The drop in inventory also suggests there are fewer opportunities for buyers and sellers to make deals. That can further chill sales, as buyers become afraid to overpay while sellers are similarly cautious about underpricing their homes.
The Realtor.com data include only single-family homes, townhouses and condominiums listed for sale on more than 900 multiple-listing services across the country. They don’t include unsold homes listed as “for sale by owner” or other properties that don’t find their way onto the multiple-listing services.
Mortgage rates have fallen to their lowest levels in decades, but demand remains weak and credit standards tight. According to the Mortgage Bankers Association, mortgage applications for home purchases were 3% below year-ago levels during the first week of October.