Sales Growth No Respite for US Housing
22 September 2011
US housing market watchers poured over a 7.7% increase in existing home sales in August. This is certainly a positive indicator; it is just unfortunate that the number of homes coming onto the market grew equally as fast thanks to foreclosures. This isn't set to change any time soon either... According to experts the so-called shadow-inventory runs deep, including homes held by delinquent borrowers who will eventually face foreclosure.
That said, at the same time that makes the sales increase even better, because if it is a sign of things to come; if sales continue to grow then we can hopefully start thinning the inventory. There will be no recovery in the US housing market until the backlog of repossessed properties is sold and the market finds a new bottom.
Some experts believe we are already at a bottom where prices are concerned, and the increase in sales could be taken as evidence of that. However, we have seen sales increase before and it turned out to be a one-off -- time will tell if this time is different. Don't get me wrong, no one respected is predicting growth in prices anytime soon, simply that the falls will be much slower going forward.
MacroMarkets just surveyed 111 economists and real estate experts from across a diverse range of locations and sectors, and it found an expectation that house prices wouldn't keep up with inflation in the next 4 years. The experts forecast an average 1% drop in prices each year between now and 2015, while the Federal Reserve forecasts an average 2% inflation during the period.