Housing market shows hints of recovery, but economic troubles remain
By Brady Dennis, Published: June 14
Home sales up. Inventories down. Prices rising in many cities. New houses being built at the fastest pace in years. Interest rates hovering at historic lows. A vibrant rental market.
A growing body of data in recent months has suggested that better days are on the horizon for the nation’s battered housing market, though it remains clear that a turnaround won’t come quickly.
The latest harbinger of (mostly) encouraging news: the annual State of the Nation’s Housing report released Thursday by Harvard University’s Joint Center for Housing Studies, which details more signs of revival.
“While still in the early innings of a housing recovery, rental markets have turned the corner, home sales are strengthening, and a floor is beginning to form under home prices,” Eric S. Belsky, the center’s managing director, said in a statement accompanying the report.
The Harvard report, released annually since 1988, assesses nearly every aspect of the country’s housing and rental markets. The findings this year offer glimmers of optimism that have been largely absent in recent years. Among them: an increase in sales of existing homes, fewer homes lingering on the market, an uptick in residential construction, signs of stabilizing prices in many areas, falling rental vacancy rates and low interest rates that make purchasing more affordable.
In addition, a new National Housing Survey released by mortgage giant Fannie Mae shows that despite the turmoil of recent years, most Americans still have strong aspirations to own a home, though fewer people than in the past see it as a lucrative investment.
“In spite of the impact of the housing crisis on home values and homeownership rates across the country, Americans by and large still hope to become homeowners,” Doug Duncan, Fannie Mae’s chief economist, said in a statement accompanying the survey results. “Some may not be financially positioned to own a home in the near future, but Americans may begin to revisit that aspiration as employment and household balance sheets improve over the coming years.”
Of course, the slivers of heartening news about the nation’s housing situation are still outweighed by troubles, and those who talk of a future recovery also acknowledge the uncertainty of the present.
The Harvard report notes that more than 2 million homes were in some stage of foreclosure during the early part of 2012, with more facing a similar fate. The number of borrowers delinquent on their mortgages has fallen, but it’s still far higher than historical averages.
In addition, more than 11 million homeowners owe more than their houses are worth, and the total amount of that “negative equity” has stayed at about $700 billion. As banks have become more cautious, lending to only the most creditworthy borrowers, many would-be buyers are having trouble getting home loans. The lackluster job market adds to those difficulties and also makes it harder for many existing homeowners to simply make ends meet.
“What the housing sector needs is a sustained increase in jobs to bring household growth back to its long-term pace and spur demand,” said Chris Herbert, the research director who helped oversee the Harvard report.
Also Thursday, California-based firm RealtyTrac reported that the number of foreclosures rose nationally in May but remained lower than a year earlier, the 20th straight month that foreclosures have fallen on a year-over-year basis. The firm reported that banks have been shedding properties by using alternatives to foreclosure, such as short sales, which still force losses but generally work out better both for borrowers and lenders.
“More banks are now recognizing that treating the problem of delinquent mortgages with short sales rather than bank repossessions can help them minimize their losses,” RealtyTrac chief executive Brandon Moore said in a statement.
The rise in short sales and the continuing year-over-year decline in foreclosure filings both bode well for the long-term health of the housing market, Moore said. But “it’s going to be a bumpy ride down to the bottom of this foreclosure cycle.”