Has the US housing market hit bottom?
This is a copy of the blog from Boris – the president of MERIX bank – a broker bank we love and deal with often. It is worth pasting all of it here AND it is good news!
Article written by Boris Bozic on the 17 Jul 2012 in Current Events
I’m referring to the real estate market in the U.S. There have been some signs that real estate market may have reached the point where you can actually see the bottom. Interesting to note that new home construction is up in many regions of the U.S. Drive through parts of Florida and you’ll be surprised by the number of new homes being built. Another sign is the number of pending sales just recently reported. On a year over year basis, pending sales were up 14.5% in the West, 22.1% in the Midwest, 19.8% in the Northeast and 11.9% in the south. Another sign that real estate market is getting better is due to increased foreclosures.
As odd as that made sound, a real recovery of the real estate market in the U.S. will only happen when financial institutions finally deal with the backlog of foreclosures. Recent reports indicate the U.S. financial institutions are taking action against more delinquent home owners. Statistics indicated that foreclosure proceedings increased by 6% in the second quarter as compared to the precious year. That’s the first increase since 2009. How is that possible? Simple, banks chose to do nothing. If the borrower didn’t approach the bank and request a loan modification or approval of a short sale, the banks were free to act at their own pace. I suspect their motivation to deal with these issues had nothing to do with any kind of empathy for the home owner. It was more to do with flooding the market with more distressed properties which ultimately would drive the prices down even further. The shadow inventory is a subject that all stakeholders wanted to set aside and deal with it in a mushroom growing fashion. Clearly something has changed, and the banks now feel that the market can absorb the additional foreclosures. This could have further impact on home prices in the short term but many analysts are predicting the drop could be as little as 1%. Here’s another stat I found to be both encouraging and staggering. At of the end of the 2012 first quarter, approximately 11.4 million homes or 23.7% of all homes with a mortgage in the U.S. were under water, negative equity. On a quarter over quarter comparison it was 12.1 million homes or 25.2%.
There’s no doubt that U.S. real estate market has a long way to go before anyone would suggest that it’s a “normal” market. Until they (the politicians, Federal Reserve, regulators etc.,) deal with the real estate issue there will be no full economic recovery. Put aside the markets and consumer spending because the real estate market is the 800 pound gorilla. The real unemployment rate in the U.S is just over 14%, the 8.2% reported unemployment rate is manipulated data and reported by Obama sycophants, and will not come down until there’s marked improvement in the real estate market. As soon as that has happened, the better it is for us. We love it when Americans are working because they love to spend, and we have stuff we would love to sell them. Recently, given the value of the Canadian dollar, we been purchasing more in the U.S., like their homes. If you’re thinking of buying a second home in the U.S., this might be the bottom.
Until next time,