US Housing Market May have Found Price Floor
05 October 2011
Could this be, has the US housing market finally bottomed out? Tune in next week to find out... Sorry they have started showing re-runs of the old original Batman tv series, but whether or not the housing market has bottomed or not is far from a cliffhanger ending, as even the most optimistic bears cannot ignore the millions of homes in overhang that will make any recovery a slow one. None the less a consensus is forming that the recent spate of positive news could indicate that prices have at least found a floor.
The latest positive news is that delinquencies are falling. According to the latest data from Lender Processing Services the number of mortgages that are more than 90 days delinquent is lower than at any point since 2008. On top of that the number of newly delinquent loans (AKA first-time delinquent loans) that are seriously delinquent is also falling according to the data. The data also shows that only 1.4% of loans that were current in February had become seriously delinquent by August, which is less than half the peak of 2.9% recorded in 2009.
The massive amount of delinquent loans, including the so-called shadow inventory of homes that are up for repossession but have either not yet been repossessed or not yet put onto the market, is a massive dark cloud hanging over the US housing market, which will not recover until the backlog of distressed sales is cleared.
Falling delinquencies indicates that at least an end is in sight. However, the short term picture is much less rosy. Foreclosure starts were up in August by nearly 20 percent compared to July 2011, with first-time foreclosure starts reaching 2011 highs. Overall, foreclosure starts remained down more than 12 percent from this time last year.
Recent data has also showed prices and sales rising. The latest release of the well respected S&P/Case-Shiller index of house prices in 20 cities showed a marginal growth for July, which was the fourth consecutive monthly increase. According to the latest report from the National Association of Realtors sales of existing homes jumped by 7.7% month on month and 18.6% year on year in August. This took the national housing inventory down 3% to 3.58 million homes, which is 8.5 months of supply at current sales levels.
On top of that the rental market is also having a very strong period right now. While this is hardly surprising with home ownership levels setting new record lows, it is very positive none the less, because it is increasing the popularity of apartments across the country, with many large funds buying apartment developments in bulk deals of late.
The US housing market is still looking at having at least another 2 years of depression and misery before all repossessions are completed and sold off, with 5 years being a more realistic figure. However, like we have seen in Spain, this doesn't mean that prices can't find a bottom long before that and may have done so already.