Housing Recovery Not Until Mid-2012
Looks like the dark cloud hovering over the real estate market will linger for a while. Fiserv, a financial analytics company, predicted that home values will drop another 3.6 percent by June 2012, causing a triple dip. That would be a 35 percent dive from the market’s glorious stint in 2006. Fiserv blames high unemployment, skyrocketing foreclosures, and consumer anxiety for the expected triple dip, according to a story by GoBankingRates.com. The company believes that the market will be on the road to recovery by mid next year. But price increases will vary depending on location. Metro areas will fare better with 31 of the 385 markets expected to have double digit growths. GoBankingRate.com says if you are looking to invest in a retirement or a vacation home, now is the time. Those kind of properties are expected to see the sharpest increase in prices, the story said. So, start shopping around while the deals are still on.
Construction Spending Increases
There’s good news in the new construction front. Builders spent more on housing construction in September compared to the previous month, according to Bloomberg. This is the second consecutive month of gains, which is a good omen for the economy. The story cited numbers released by the Commerce Department, which showed that building outlays rose 0.2 percent in September to a seasonally adjusted annual rate of $787.2 billion. Analysts were expecting a 0.3 percent gain. Under normal circumstances, economists consider spending in the amount of $1.5 trillion to be the sign of a healthy market, according to the Associated Press.
“Construction spending is rising from a very, very low level, but it does look like we’ve established a base,” Christopher Low, chief economist at FTN Financial in New York, told Bloomberg. “Residential construction is at least stable, but there’s no real growth there.”
Construction in the private residential sector, which consists of condos, single-family units and apartments, gave the numbers a big boost. In that segment, builders broke ground at the fastest rate in 17 months. Much of the growth was contributed by an increase in building activity in the multi-family housing sector, a trend driven by droves of families preferring to rent rather than buy, according to Bloomberg. That doesn’t bode well for the housing market. Especially in a year when, according to the AP, the peak buying season had its worst show in half a century.
Obama’s Housing Scorecard
The results for the housing market’s performance for the month of October are out. And the scores are a mix of good and bad. The housing scorecard, prepared by the U.S. Department of Housing and Urban Development and the U.S. Department of the Treasury, shows that although new home sales rose in September compared to the previous month, they were still lagging behind 2010 numbers. Foreclosure completions also climbed. But, the market fared better in mortgage defaults and foreclosure sales, with both those numbers showing a decline. The numbers are an indication that more homeowners were able to get relief in their house payments, according to a news release.
“The housing data in this month’s Scorecard illustrate how complex the market is and why the Obama Administration has chosen a variety of approaches to help spur recovery,” said HUD Assistant Secretary Raphael Bostic in the release. “…we have much more work to do to reach the many households who still face trouble and to help the market recover. To help responsible homeowners, we have to make it easier for people to refinance at interest rates that are now near 4% – putting hundreds of dollars in real savings back in their pockets.” The good news is the administration seems to be trying. Hopefully, its mantra will work its charm on jittery buyers and help the sector get a stellar scorecard in the near future.
Homeownership Rate Climbs in the Third Quarter
A Census Bureau report said this week that the U.S. homeownership rate increased 66.3 percent in the third quarter ended September. This, when rental homeowner vacancy rate climbed 9.8 percent, which is down from 10.3 percent last year, but up from 9.2 percent in the previous quarter, according to the Associated Press.
“These are two unexpected changes,” John McIlwain, a senior fellow for housing at the Urban Land Institute, told the AP. Mcllwain, as recently as two weeks ago, was predicting a further decline in homeownership to 65.7 percent, the AP said. Hopefully, this glimmer of good news will continue in the future.