For the first time in a long time, housing figures are coming in better than expected. The National Association of Home Builders’ sentiment index jumped three points this month to 20, its highest reading in over a year. Last week, the Commerce Department said building permits and construction of single-family homes rose in October. The Federal Reserve’s fourth-quarter loan survey showed a pickup in demand for mortgage loans.
Mission accomplished? Not quite. Construction is picking up but remains at historically depressed levels, and broader sales activity is still anemic. Indeed, the National Association of Realtors’ existing-home sales report, out Monday, is likely to show a second straight monthly decline in October to a seasonally adjusted annualized pace of about 4.8 million units. That would mean the sales rate has dropped by more than 10% so far this year.
Meanwhile, the foreclosure supply is ticking back up. After declining for three straight quarters, the percentage of loans on which foreclosure action has started rose in the third quarter, the Mortgage Bankers Association’s latest survey showed. This was partly due to remediation programs and the sunset of earlier foreclosure halts, the group said. The continued trickle of distressed properties is likely to keep downward pressure on home prices.
Not all foreclosures are created equal, however, and regional disparities are becoming more pronounced. In states with nonjudicial foreclosures, like California, properties are seized and resold more quickly than in judicial states like Florida, where court hearings can delay this for months, if not years. California’s market, having fallen hard and fast early on, is now starting to recover. Florida, which also fell sharply, remains among the weakest.
Bank of America Merrill Lynch economists expect the foreclosure process to speed up in nonjudicial states next year, with liquidations peaking in 2013. This is partly why they expect home prices to drop another 8% on average nationwide over the next 18 months before bottoming. This assumes a healthy pickup in sales; if customers shy away because of economic angst or tighter lending criteria, a rebound will take longer to materialize.
Still, six years after existing-home sales peaked, the market is at least edging toward a bottom. The biblical notion that seven years of famine follows seven years of feast may have something to it.
Wallingford Real Estate – Wallingford, PA 19086
