Analysts Warn Against Excessively Positive View of Housing Recovery

(TheNicheReport) -- Looking back at the various reports released since January, 2012 is shaping up to be a very positive year for the United States housing market -at least since 2008. According to some analysts, however, most of these positive reports have been predicted and the ongoing housing recovery is no different from situations seen in previous years. If the seasonal activity during spring and summer in 2009, 2010 and 2011 is taken into account, the fall and winter of 2012 may take away some of the gains achieved since January.

Current Expectations Americans are feeling upbeat about the housing recovery. Positive expectations about the recovery of real estate prices have dominated surveys since November of 2011. Only about 11 percent of American consumers believe that home prices will shift downward before Thanksgiving. Those consumers who are optimistic now are also somewhat conservative; they believe that median prices in 2013 will increase by 1.5 percent. Those who have more skin in the game, however, are more cautious in their expectations. Almost 80 percent of prospective home sellers polled by Fannie Mae do not believe it is a good time to sell now. With only 20 percent of homeowners willing to list their properties and accept bids on their properties, the housing recovery could take longer than expected.

Shadow Inventories Short sales and fewer restrictions on Real Estate Owned (REO) portfolios by major lenders have major drivers of the housing recovery in 2012, but now the banks have gotten a taste of the high demand for rock-bottom deals. This means that the pace of short sales could once again slow down in 2013 as banks allow more competition among real estate investors. Even so, REO portfolios are not part of the shadow inventories that may really threaten the housing recovery. Shadow inventories are made up of those homes saddled with defaulted mortgages or protracted foreclosures. Real estate analytics firm CoreLogic estimated in July that 2.3 million homes in the U.S. are part of this inventory, and as long as they remain in limbo they will have a negative effect on home pricing -thereby stalling the recovery. This situation is more pronounced in states like Florida and New York where foreclosure proceedings can take years.

Consumer Sentiment  Conditions for a housing market recovery are definitely in place. Healthy price competition is taking place in regional markets like Phoenix and South Florida, and the Federal Reserve has vowed to keep mortgage interest rates as low as they can for another couple of years. Still, consumer sentiment had a greater effect on the housing recovery. Once buyers and sellers are truly motivated by external factors like low unemployment and increased spending, the housing market is bound to get a healthy boost.