Those who closely follow housing market news may have noticed an uptick in positive reports lately. Here’s a recap of the highlights of recent months that together suggest a rebound could begin as early as this year.
Existing home sales are rising.
Existing home sales grew by 5% in December for the third consecutive month. Inventories fell over 9% to a 6.2-month supply, according to the National Association of Home Builders (NAHB). This should ease downward pressure on home prices. According to housing experts like National Association of Realtors Chief Economist Lawrence Yun, this could be an early sign of a sustained recovery.
Newly-constructed home starts are growing.
New construction increased by 4.4% in December. It was the biggest monthly increase since the homebuyer tax credit program expired in 2010 and is up 12% compared to a year earlier.
Builder confidence is improving.
Builder confidence in the new construction market climbed for the fourth consecutive month in January, according to a NAHB monthly survey. This was the highest level measured since the summer of 2007.
Here in the northeast, an unseasonably warm winter has encouraged greater-than-normal activity in sales offices, helped along by continued builder incentives and upgrades to new construction that is already considered turn-key ready, since homebuyers won’t have to budget for repairs, as they might if they bought an existing home.
These statistics, combined with additional market data that shows Americans continued to pay off debt and even added home equity lines of credit in the third quarter of 2011, led CoreLogic’s Chief Economist Mark Fleming to pronounce himself bullish on continued stability and positive, albeit weak, growth for the market in 2012.
Reports show that consumer sentiment has also strongly rebounded. In a Harris Interactive poll last fall, 70% of Americans said homeownership is still part of their American dream; 80% of current homeowners said they plan to buy another home in the future, and despite the high rate of foreclosures, 57% said home ownership still ranks among the best long-term investments they could make, compared to putting money in a retirement plan (52%), buying gold (26%) or keeping cash under the mattress (11%). What’s more, 59% of current renters aspire to own their own homes.
In a January 2012 NAHB survey, three out of four voters support federal tax incentives to promote homeownership and 73% opposed elimination of the mortgage interest deduction.
And while we’ve heard a steady drumbeat of news about foreclosures, we don’t often hear about the flip side of that equation – those homeowners with substantial equity in their homes. A September 30 Washington Post story reported on a CoreLogic study showing roughly one of every three homes in America is mortgage-free. Among those with mortgages, 48.5% have at least a 25% equity stake in their property, while roughly 25% have over 50% equity. About 37% of Connecticut homeowners enjoy an equity stake of over 50%, putting the state far above the national average.
Despite continued challenges in the marketplace, a combination of record low mortgage rates, bargain home prices, large pent-up demand and a slowly improving job market hold the promise of a housing recovery.
