Housing Market Trends
by Eric Myers, Real Estate Vice President
Every month the press is filled with commentary on the latest housing market figures. Some of the stories would benefit from additional perspective. Of course, all housing is local, so the information needs to be considered in conjunction with knowledge of local market conditions. Jed Smith from the National Association of Realtors (NAR) writes a Behind the Numbers column that provides additional perspective. In his recent column Smith addressed:
· Distressed Property and Shadow Inventories - the level of distressed sales is likely to continue for the next several years, negatively impacting prices and the new construction market at entry level. However, a tsunami of additional distressed property sales appears to be unlikely.
· Pent Up Demand - the existing home sales market appears to be below normal projected growth, apparently held back by employment problems and mediocre consumer mood. The data suggest that there is pent-up demand, but a greater economic recovery, particularly in jobs, appears to be necessary before the demand is unleashed.
· Housing Starts - new home construction appears to be below long-run demand. In the longer run this will reduce the total supply of homes on the market, working to firm up prices.
· How Housing Inventory Impacts Pricing - the inventory of existing homes on the market in June was approximately 8.9 months, an increase in housing inventory, possibly due to additional listings developing as the market starts to recover. An increased inventory at this point could become a negative for prices unless an expanded economic recovery releases some pent-up demand.
Smith concludes: Assuming that the economy is not hit with a “double dip” recession, all of the data seem to indicate favorable prospects for sales—unlikely to decrease in the short run, positioned to increase once the economy adds additional jobs. In the case of prices, there are no indicators of major changes either way unless the inventory of unsold homes increases significantly. At the local level, areas with stronger job recovery, improving economies leading to fewer foreclosures, and local economies able to unleash additional pent-up demand should experience somewhat greater improvement