US Housing Recovery More Believable, Study Shows

Economists, housing analysts and members of the National Association of Realtors have been saying for some time that the U.S. is finally on the road to a real estate recovery, but they?ve all arguably got a stake in the claim being true. Now, a new study shows that more Americans believe it, too, which sets a different tone when it comes to buying confidence ? a telling market recovery indicator. Home prices and sales are still down compared to pre-crisis levels, but both have been rising steadily and the movement has been enough to get more and more prospective buyers and sellers in the game. Even so, a shadow inventory of distressed homes still looms and nearly 22% off all borrowers remain upside down on their mortgages and the negative force is enough to slow the process. For more on this continue reading the following article from TheStreet.

Economists are saying it, and now even some Americans are saying it.

After falling to depths not seen since the Great Depression, the U.S. housing market may finally be rising from the ashes.

It may not seem like a lot, but 27% of Americans believe the value of their homes will increase in the next year, according the CNBC All America Economic Survey.

That is the highest percentage since 2007 and the third straight quarter that such optimism has gained.

"Overall the housing industry has come back," said Standard and Poors' David Blitzer, commenting on Tuesday's release of the latest S&P/Case-Shiller home price indices. "We might finally get a little boost to the economy from the housing sector."

Home prices in the nation's top twenty markets rose 1.2% in July from a year ago, according to S&P/Case-Shiller.

All of those markets saw month-to-month price gains, while just four saw annual declines. Atlanta continues to see the largest drop, down just under ten percent year-over-year, but even its declines are easing.

In Phoenix, where distressed properties have made up the bulk of home sales, prices are up 16.6% from a year ago, due to big supply shortages of low-end homes.

Home prices are still down 30% from their peak in 2006, but just the prospect of a real bottom has some buyers finally getting off the fence. In addition, rising prices helped 1.3 million home owners to rise out of a negative equity position on their mortgages in the first half of this year, according to CoreLogic.

Nearly 11 million, or 22% of all borrowers, are still stuck in place, owing more on their mortgages than their homes are worth, and an additional 2.3 million have less than five percent equity in their homes, making a move up unlikely.

The latest numbers, from existing home sales to earnings from the big publichome builders, are fueling much-needed confidence in housing, but it would be na?ve to declare that this industry is completely out of the woods.

Positives, like record-low mortgage rates and much-improved affordability are offset by still high negative equity, tight credit conditions and continued uncertainty about the overall state of the economy.

Just ten percent of those polled in the CNBC survey say the economy is good or excellent, with 91% saying it is only fair or poor. Fifty-three percent say it is poor, with 25% saying it will get worse. These sentiments are little changed from the survey results in June.

Housing still faces some huge unknowns, including tough regulation on mortgage lending, the looming "fiscal cliff," and more than 5 million loans that are either delinquent or in the foreclosure process.

Supplies of distressed homes are low, but much of that is due to delays in the foreclosure process which are just now beginning to lift. New mortgage delinquencies are falling slightly, but they are still far higher than historical norms.

There is also a possible new headwind that few have mentioned. That is the potential loss of the Bush 2007 Mortgage Relief Act benefit.

This act negates any tax liabilities against borrowers who do so-called "short sales." This is when the bank allows the home to be sold for less than the value of the mortgage. The debt that is forgiven (that is the amount of the mortgage not covered by the sale price) would usually be taxed, but this act put a temporary stop to that in order to give borrowers relief and stimulate the short sale market.

This act expires at the end of this year, and Congress has yet to extend it.

"Private investors, Realtors and banks have begun to drive short sales hard, as foreclosures take too long and are too politically sensitive," said housing analyst Mark Hanson. "The loss of the Bush 2007 Mortgage Relief Act benefit, which has been driving incremental short sale volume all summer -- and is responsible for a large part of the year-over-year increase in sales volume -- will drive sales volume into a "triple dip" in the winter/spring...Prices will get hit as well."

It is of course possible that Congress will extend the act at the last minute, but this is just one example of many "ifs" still present in the market.

Mortgage rates may be low now, but some say they could move up next year, influenced by factors outside the Federal Reserve's recent attempt to lower them (QE3).

Home prices appear to be improving, but a new flow of distressed properties could lessen those gains this fall. And again, so much still depends on jobs. S&P's David Blitzer may believe housing is back, but his colleague Robert Shiller said last week that he wasn't convinced. Suffice it to say, the housing market has come a long way, but it still has a long way to go.

This article was republished with permission from TheStreet.

Source: http://www.nuwireinvestor.com/articles/us-housing-recovery-more-believable-study-shows-59874.aspx

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