Do you Believe the Hype: Housing Recovery Still Illusive

by 26 Mar 2012

(CNBC) -- Housing was charging back. Spring sprung early. Sentiment among home builders doubled in six months. Any talk that the fundamentals might not be supporting the sentiment was met with harsh criticism. And then suddenly it wasn’t.

A slew of new housing data last week disappointed the analysts and the stock market, and all of a sudden you started to hear concern that maybe housing wasn’t exactly in a robust recovery.

From home builder sentiment to housing starts, to home builder earnings right through to sales of newly built homes, there was not one hopeful headline in any of it (except perhaps if you invest in rentals, as multi-family housing starts made more gains, but that is a contrary indicator to housing recovery).

And then an email from a Realtor in New Jersey: “Just reviewed March buyer clicks, Google’s analytics on all the sites we monitor – March is turning out to be the weakest month since last October re: Buyer interest..”

Now we start another week with another disappointment. Pending home sales, a measure of signed contracts for existing homes, not closings, fell half a percentage point month-to-month.

That may not seem like a big deal, but the analysts were looking for a small gain. No doubt the Realtors will point to the solid 9% gain from a year ago, but so much of that gain is based on a change in the foreclosure pipeline.

Last year the foreclosure process stalled. The “robo-signing” mess brought everything to a standstill, and that left investors with little to buy on the distressed side. Foreclosures began ramping up again in the late fall, and that led to a surge in investor buying. Was that the “recovery” we were seeing?

Investors are still rushing into the market, with distressed sales making up a near-record 48.7 percent of sales in February on a three month moving average, according to a new report today from Campbell/Inside Mortgage Finance.

Investors are now a full quarter of the market, and they are increasing their activity in short sales (when a lender allows the home to be sold for less than the value of the mortgage).

Don’t get me wrong, investors buying up the distress is necessary to cleanse the market, but it is not real recovery. Mortgage originations are at a 12-year low, despite record low rates. Normal, “organic” home buyers, move-up owner occupants, are not flooding back into this market. Rents are still rising.

Read full article from CNBC


  • by ottfive | 3/26/2012 8:21:01 PM

    hype, propaganda need I say more? Give the real facts!

  • by Stan Brody | 3/26/2012 10:17:59 PM

    There can, nor will be any sustained recovery until the housing crisis is properly addressed... HARP2 will end up proving to be a gross failure... with some 20 plus percent of ll homes sitting with negative equity, even if this program reaches its entire three year "projection" (prayer) it will not amount to a pimple on the ass of the crisis...

    ONLY massive across the board, encompassing all lenders, not just Fannie and Freddie, incorporating Mark to Market from the lenders, tax and cash credits from the treasury and the homeowners waiving the mortgage interest deduction (to pay back the mortgage) as well as resetting real estate tax rates to the date of the original mortgage has a chance of truly stabilizing housing... with an aggressive program along these lines, there will be no true recovery before 2022... the numbers are far to big for the market to absorb these numbers...


Is TILA-RESPA a good or bad thing long term?