Plenty has been happening the last few weeks. All the chaos caused by the uncertainty of the European Union ability to hold it together specifically that of Greece staying or leaving the union, our equity markets have taken a pretty good hit and have given back almost ten percent of the gains it made this year. This kind of volatility also affects consumer sentiment which has taken a hit as well, people are not feeling as confident as they have been. They are beginning to understand that even though the unemployment rate has fallen again it wasn't because more people found jobs its because more people just stopped looking and are no longer considered unemployed and are no longer counted, I know its crazy.
While resale home prices are not falling as fast as they were they are still falling, same with new sales. Yes there are many areas in South Florida where home prices have been trending up, but we have to remember these areas were hit pretty hard with home prices dropping up to and above 50%. The areas where home prices took the biggest hit are the areas finding a bottom and actually rising about 5-6%. That's good news but these owners still a long way to go before they can breath a sigh of relief, especially when you consider over 25% of mortgaged owners are upside down, meaning they owe more then there home is now worth.
So while some area owners are finally seeing positive gains in their homes values they still face the problem of finding buyers that banks are willing to lend to. Then add to that you still have to deal with home appraisals not coming in to substantiate the value even if the buyer can get approved for a loan. According to a recent article in Reuters " An estimated 10 to 20 percent of credit worthy home buyers are locked out
of the housing market because of tightened credit conditions, U.S.
Housing Secretary Shaun Donovan told Reuters." When that many potential home buyers are locked out of the market thats a very serious problem which some how needs to be addressed.
Another problem in the market is what happens to those people underwater on their home loans, if they see no hope in every getting ahead on their debt many will just walk away. Now that doesn't help the housing market, because what we dont need is more inventory especially more distressed inventory that will be priced below normal resales. But there is some good news on the front, several banks holding these types of loans are now willing to work out deals to forgive some debt so that owners can make there payments and see some positive gains in reducing their mortgage debt. Banks forgiving debt can in many cases be less expensive for them then allowing a home to go into short sale or foreclosure.
For those owners who are to far underwater or have no job to make mortgage payments a few lenders are working out deals to pay the owners to leave "NEW YORK – May 16, 2012 – Bank of America announced a new short-sale
program – called enhanced relocation assistance – to help homeowners
move debt free and get paid $2,500 to $30,000 for doing so. The actual
cash payment depends on the appraised value of the home." So for those that are in rear trouble this program gives then a glimmer of hope that they will have a chance to start over without the crushing debt of a mortgage hanging over there heads.
Other programs simply turn owners into renters, allows them to stay in the home, benefits the owners credit rating, they pay below market rent rates for three years by which time the lender can find another buyer for the property without subjecting the property to a short sale which negatively impacts the homes resale value.
The future of the housing market is good but not great at least for the next several years. " According to a new study released today
by The Demand Institute, a new nonprofit, non-advocacy group formed in
February by The Conference Board and Nielsen.May 16, 2012 – Home values will start to climb again and related
consumer industries will grow in 2012 and beyond as the U.S. housing
market finally turns the corner." It goes on to say " The Shifting Nature of U.S. Housing Demand,
predicts that average home prices will increase by up to 1 percent in
the second half of 2012. By 2014, home prices will increase by as much
as 2.5 percent." So while positive gains are expected they are not robust gains and those gains would be for homes that are priced to the market, and not based on what the owner thinks its worth. Many owners still have not come to grips with what there home is worth now and not what it was worth at the peak of the market a few years back.
Another glimmer of light came from the new housing market, " The Commerce Department said Wednesday May 16 that builders broke ground at a
seasonally adjusted annual pace of 717,000 homes in April from March.
That’s 2.6 percent more than March’s total, which was revised higher.
Construction rose for both single-family homes and apartments." So we are slowly clawing our way in new housing but it will be many years before we get back to the peak years, if ever.
So things are still looking up for US home sales but the head winds created by the economic problems in the Euro Zone and the fear of contagion, its effects on our stock market has interrupted our economic recovery and hurt consumer confidence. As soon as the EU can put a floor under their problems the sooner our economy will get back on track. Things have definitely improved throughout the US but ours is a precarious recovery that cannot sustain any lengthly economic problems over seas. so hope they can work out there problems.
