Several positive evaluations in home sales and housing have started recently, topped by last Thursday’s 7.4 percent monthly jump in contracts to buy existing homes. We are already seeing stimulation in the market. This is also managing to overtake what was a predominantly negative read on home prices in the past months.
I don’t intend to create false hope, I will say that even the Realtors, while publicizing affordability and pent-up demand, mention that a lot of these new signed contracts are the result of delayed transactions. Certainly true in my case, as most of my transactions are short sales and we’re still seeing them take at least 4 months to close.
According to the National Association of Realtors chief economist Lawrence Yun, “Contract failures have been running unusually high, some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,” he said.
Then just last week, there was a big story in the Wall Street Journal about hedge funds placing their money back into housing, hinting that the housing rush must be on its way. Some of these investors are playing the surging rental market for now, getting bargains, but not expecting any big “flip” returns any time soon.
Accoring to Peter Boockvar at Miller Tabak, “Bottom line, whether due to even lower prices, historically low mortgage rates, falling inventory and a better tone to the labor market or a combination of all, the housing market is showing signs of stabilizing. I say stabilize instead of bottom, as its too early to make that claim just yet with still a huge amount of foreclosures that hasn’t worked its way through the judicial system and prices that haven’t likely stopped going down as a result.”
Some people are expecting that foreclosures will be pushing home prices down to another five or ten percent before hitting a true bottom. Additionally, those rock-bottom mortgage rates that everyone has been talking about for weeks may already be headed up, as the conservator of Fannie Mae and Freddie Mac has already directed these two mortgage giants to notify service providers that guarantee fees will be rising to ten basis points for this week. That is to pay for the temporary extension of the payroll tax cut. The proceeds go to the U.S. Treasury, and not to the balance sheets of the said mortgage companies. This solution will probably raise rates a bit, but those rates will still be close to historical lows.
So, are things getting a bit better?
Maybe. Someone last week said that housing has gone from a negative to nothing for the U.S. economy. I guess that must mean something.
“It’s not going to keep 2011 from being the worst on record for new home sales, for single family permits and single family housing starts. Next year is going to be better, but that’s not saying much because this has been the worst year, probably since 1945,” said IHS Global Insight’s Patrick Newport. In other words, housing isn’t exactly rising up, but at least it’s starting to move.
What’s the moral to all this? No matter what’s happening with the real estate market, SOMEONE always needs to buy or sell. Real estate will always make a safe investment bet when bought right. And for buyers buying as a primary residence, tax advantages and lifestyle benefits will always play a major role in decision-making as to when is the right time to buy.
