It’s time to say it: The housing market recovery is happening. Now. We’ve passed bottom and are on the way up.
When I say “bottom” I don’t mean that every metric is going to be going up. Prices, for example, have a bit of ways to go down. I mean that the overall bottom of the housing crisis is past us.
Now, before I’m accused of being an –AR cheerleader, let me remind you that 1) I don’t do that stuff, and 2) I’ve been accused of being too negative when I wrote about the bad stuff. If the numbers are bad, I don’t do sugarcoating.
So why do I say we’re on the upswing? Several reasons.
Grains of salt
First, a quick note. Don’t believe me. Really.
I’m not going to present all sorts of charts comparing this year with the Great Housing Crisis of 1825 or whatever. I’m not going to try to justify this with reams of data. I’m looking at the gestalt — the bigger picture — based on all the housing news I read every day.
I’ve watched the endless tide of negative news be replaced, bit by bit, with positives. It’s taken a while, but now when I open my reading list I see a heck of a lot more good than bad. So if you say, “Oh, please, the inversely-correlated regressive dollar-value figures show that housing still has 28.412 percent (+/- 3.54%) to fall,” I’m not going to argue.
But I still say we’ve passed bottom. We are in a full-swing recovery.
Unemployment is down, and that means delinquencies (and thus foreclosures and REOs) will also begin to drop. In fact, Fannie Mae and Freddie Mac have been reporting that their Single-Family Serious Delinquency Rate has been dropping, and the national consumer credit default rate has been falling for the past four months.
Consumer confidence is up. That means people are believing in the recovery, and this is one of those cases where believing really does make a difference.
HARP is working. Letting more people refinance at lower rates puts more money back into the economy. Granted, they aren’t using that money to buy a new house, but they will spend it — and that means jobs, and jobs means housing.
Buyers are returning. Sure, sure, they aren’t coming at the rate we all want (except for you, NoVa), but buyers are coming back. Maybe people can’t resist the low prices, or the low rates, or maybe they’re simply feeling more confident. But sales and pending sales are going up.
Multiple offers aren’t quite so rare. In some places, as the Wall Street Journal put it, “Stunned Home Buyers Find the Bidding Wars Are Back.”
Lending is loosening. The Federal Reserve Board found that borrower demand is increasing, and lenders are preparing to “increasing their exposure to such loans.”
Investors are investing. Housing as an investment — in the sense of creating rentals, not flipping — is catching on. Investors are pouring money into the market, both by buying single-family homes and by building multi-family ones. After all, eventually all those 20-somethings who moved back with mom and dad are gonna to have to leave.
Homebuilding is up — housing starts are more than 36% above their lows, and homebuilders say they see a big boost in order growth. Oh, and construction employment is up, too — about 100,000 jobs from the bottom.
Short sales are getting more efficient. Yes, the government had to step in and give the banks what-for, but the end result is what counts, and that means no more year-long delays for short sales. The new rules mean that roadblocks have been turned to speedbumps. And speedbumps we can handle.
Interest rates have remained crazy-low. Despite predictions of a big jump ‘any day now,’ it hasn’t happened. And let’s be real — the average consumer isn’t going to say, “I would have bought at 3.95%, but not at 4.1%.”
“Shadow inventory” never flooded the market. The whole panic that foreclosures and REOs were going to pour out of the pipeline and send us back to 2009 — well, it never happened. And Virginia’s pipeline isn’t all that clogged anyway. As Calculated Risk put it, “[I]t is hard to imagine a huge wave of foreclosures, if anything it will be more like a sustained high tide in certain judicial foreclosure areas.”
These changes aren’t always huge or earthshaking or headline making. But they’re consistent and they’re across the board, from lenders to builders to buyers. And they all point to a turnaround in the market.
Sure, most of these numbers are national, and housing is very, very local. But national figures and sentiment certainly affect local markets; we all read the news and see what’s happening. The nation can affect us just as we can affect the whole country. It’s a feedback loop.
Yes, but what about prices?
With all the good news that keeps coming, there is one thing that casts a shadow… or so it may seem: prices. They’re down, and they seem to keep dropping (at least nationally) — 2.9% over the past year.
Don’t panic. They have some more to go, but that’s OK. This is what it looks like when the market gets back to normal. People are coming to terms with the idea that the housing bubble was the abnormality, and that prices are returning to historical norms.
Of note is the fact that REO prices have actually risen — 5.5% over the past year. Investors know good deals when they see them, as do individual home buyers. Higher demand means higher prices, which means less drag on the prices of non-REO property.
There are also more short sales happening that foreclosures. That’s better for property values, and it’s another parachute keeping declining prices from dropping too fast. And listing prices, according to Trulia, are inching up.
Still, what we saw in 2006 and 2007 wasn’t the norm, so don’t expect prices to get back there any time soon. Talk of prices hitting “bottom” is really talk about prices returning to their normal level — a level, Case and Shiller have shown — that hasn’t changed much in more than a century.
But dropping prices aren’t going to derail the recovery. In fact, they might help it as more people realize that yes, it really is a good time to buy.
I’ll say it once again: I may have no clue what I’m talking about. Everything could come crashing down tomorrow. Greek default, war with Iran, red tides, Japanese radiation, Presidential election season — all these things and more could wreak drastic changes.
But my bet is on the recovery. It’s here.