Another Two Years for a Market Turnaround
Have you been wondering when the housing market will pick up steam again? Give it another year or two, says a leading economist. That’s how much time it could take for the foreclosure storm to blow over and the oversupply of inventory to rectify itself, according to Mark Zandy, chief economist at Moody’s Analytics. Zandy, who spoke at the Mortgage Bankers Association conference in Chicago this week, told his audience that significant overhaul or spiffy new programs are probably not needed to jump start the housing market. For now, just a little tune up of existing programs would do, he said. We may not see home prices soaring yet, but they will be leveling off soon, he said.
That’s definitely good news if prices are bottoming out.
“I don’t think our problems are overwhelming … they are manageable,” Zandi said, according to a Dow Jones report. “The key to home prices is the share of home sales that are distressed,” he said. “A year, year-and-a-half down the road that share will start coming down (and) you get price stability and then price growth.” One of the suggestions Zandi had was for banks to relax the liabilities they take on when underwriting a new loan, Dow Jones said.
Banks Bring out the Excavators in Cleveland
In the heart of America, where foreclosures ravaged the housing market, banks are bringing out the mean machines to rid the market of inventory that’s been dragging down prices. According to the Washington Post, excavators leveling off unsalvageable vacant properties are a common sight in Cleveland, Ohio. And who’s footing the demolition bill? The banks.
According to the story, lending institutions are shelling out as much as $7,500 per job. That probably is a smart business move considering the expenses these organizations are incurring in maintaining foreclosed properties that nobody wants. It’s often cheaper to rid these homes than keep them sitting in the market, the report said. Disposing them also clears up the long list of inventory and helps stabilize prices. For the city, the once vacant properties have now made way for church additions, community gardens and parking lots. The changes in Cleveland are happening because of a state law passed in 2009, creating “land banks,” which had the power to buy vacant, unwanted properties and turn them around or mow them down. Other states now seem to be following Ohio’s steps as they try to find a solution for the flood of orphaned homes in the market.
Foreclosure Activity Up
Some bad news again this week. The number of initial default notices served on homeowners failing to make payments jumped 14 percent in the July to September quarter, according to RealtyTrac, Inc. The Associated Press says the uptick indicates that banks are pursuing homeowners, who are defaulting on their payments more aggressively. This is the first increase in foreclosure activity after five consecutive quarters of decline. While this move would serve up the market with more inventory, the silver lining is that the dark cloud hovering over the market of homes headed toward foreclosure will slowly evaporate. The immediate impact would probably be more unsold homes in the market. Would that impact home prices? We will just have to wait and watch.
Is Phoenix Recovering From the Glut?
Activity in the Phoenix-area housing market slowed down last month, says a report from the W.P. Carey School of Business at Arizona State University. “When you look at the drop in the number of transactions from August to September, 43 percent of that decline is due to a decrease in foreclosure activity,” says W. P. Carey School of Business professor emeritus Jay Butler, who wrote the report. “At the same time, though, the overall housing market is not strong enough to make up the decline in activity with traditional sales.” Sales of previously occupied single-family homes crossed the 9,000 mark in August. The following month that number dropped to fewer than 8,000, which is lower than sales for the comparable period a year ago. Foreclosures constituted 29 percent of activity, according to the report.