Subscribe

Top Facts About US Housing Market

Speculators driving housing market

By Heide B. Malhotra
Epoch Times Staff
Created: February 7, 2013 Last Updated: February 7, 2013
Related articles: Business » Real Estate
Print E-mail to a friend Give feedback

“What I hear in the mainstream media about the rebound in the U.S. housing market isn’t very convincing to me. In reality, we don’t have any real growth in the U.S. housing market—only speculation,” a Jan. 25 article on the Profit Confidential website states. (Tim Boyle/Getty Images)

“What I hear in the mainstream media about the rebound in the U.S. housing market isn’t very convincing to me. In reality, we don’t have any real growth in the U.S. housing market—only speculation,” a Jan. 25 article on the Profit Confidential website states. (Tim Boyle/Getty Images)

Real estate and other market experts suggest that a housing market recovery is on its way, and residential home prices are moving upward again, while others state that the housing market isn’t out of the woods yet.

“Americans continue to show growing confidence in home price increases over the next 12 months, providing further indications of a slow but steady housing recovery,” according to a Federal National Mortgage Association (Fannie Mae) November 2012 announcement.

On the other hand, in January, the U.S. Department of Commerce released numbers showing that the latest residential sales didn’t paint a rosy picture. In December 2012, the residential housing market shrunk by 7.3 percent compared to November 2012.

A Jan. 24 article on the Seeking Alpha website talks cautiously about a housing sales recovery and bases its optimism on the Architecture Billings Index (ABI), as well as the November 2012 Federal Housing Finance Agency’s report of House Price Index increases for 10 successive months.

The Seeking Alpha article states, “The December [2012] ABI score was 52.0, down from the mark of 53.2 in November [2012]. … This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings).”

Housing Inventory at a Glance

“The current residential shadow inventory as of October 2012 fell to 2.3 million units, representing a supply of seven months. The October inventory level represents a 12.3 percent drop from October 2011, when shadow inventory stood at 2.6 million units,” according to a CoreLogic report on Jan. 2.

There is a distinct difference between shadow and regular housing inventory. Shadow inventory consists of homes that have been foreclosed or are in default, but are not yet included in the housing inventory for sale. In a typical housing market, the housing inventory consists of new homes not sold yet or homes for sale by owners.

A report published Jan. 23 on the Lender Processing Services website states that as of the end of December 2012, 5,292,000 houses were 30 or more days past due in their mortgage payments or in foreclosure.

The Housing Tracker on the Department of Numbers website suggests that the U.S. housing inventory in metropolitan areas amounts to 661,367 homes as of Jan. 28.

At the end of third quarter 2012, there were 2 million homes for sale, and 3.8 million vacant homes kept off the list of houses for sale, totaling 5.8 million homes that needed to be sold, according to a December 2012 report by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury.

“Data continue to show important progress across many key indicators with the housing marketing bottoming out nationally and clearly turning a corner—as home values continue to rise and home sales remained strong in November—although officials caution that the overall recovery remains fragile,” according to a Jan. 11 HUD announcement.

Data published on the National Association of Realtors (NAR) website notes that in December 2012, 4.9 million existing homes and 369,000 new homes were sold.

“Demand continued to expand faster than supply. … The market has steadily moved towards a seller’s market. … Tight inventory conditions have boosted prices,” according to the NAR December 2012 Edition of the Realtors Confidence Index report, which is based on data from Dec. 27, 2012, through Jan. 4, 2013.

Problematic Conditions Hamper Sales

“Respondents indicated that credit conditions continue to be extremely tight, that lenders are taking too long in approving an application, and that information and documentation requirements are excessive and not requested in a timely manner,” according to the NAR report.

Lenders are approving loans for buyers with excellent credit scores, those with scores of 740 and above, but are risk averse to buyers with lower credit scores. According to the NAR, should lenders loosen their risk aversion, realtors could sell between 500,000 and 700,000 more homes, creating 250,000 to 350,000 jobs annually for the U.S. economy.

“Appraisals continued to be a problem in moving transactions to closure,” the NAR report states.

Some appraisers are basing appraisals on foreclosure values and are ignorant of true market conditions. Appraisers also add additional conditions, increasing the cost of the appraisal, and take too long to complete the process.

“Approximately 10 percent of the respondents reported that appraisal problems led to contract cancellation; about 10 percent reported a delay as a result of an appraisal problem, and almost 13 percent reported that the appraisal problems led to lower prices,” according to the NAR report.

Housing Market Realities

“The soft rebound in the U.S. housing market and home prices is something that’s never happened in our history. It’s not individuals buying houses that are moving prices and demand higher; it’s institutions. Yes, big institutional investors are buying houses—and in a big way!” according to a Jan. 11 article on the Profit Confidential website.

The above-mentioned article states that according to Bloomberg, the Blackstone Group LP paid $2.5 billion for 16,000 houses. In October 2012, the Blackstone Group owned homes with a total value of $1.5 billion and continued to purchase homes, spending $100 million weekly.

Colony Capital LLC, a private real estate investment firm, has purchased 5,500 homes since April 2012 and suggested that it would continue buying homes until the end of 2013, increasing their inventory by $1.5 billion.

Waypoint Homes, a home rental company, bought 2,500 homes and intends to buy another 7,500 homes during 2013.

Cogsville Group LLC, a Chicago investment group, paid $2.1 million for 94 foreclosed real estate properties and is aiming to purchase around 3,000 such homes during 2013 and the beginning of 2014.

“Cogsville in September [2012] completed its first residential buy here in partnership with federal mortgage giant Fannie Mae, investing $2.1 million in equity to take control of 94 foreclosed local properties scattered across the region … valued at $13.7 million,” the ChicagoRealEstateDaily.com website states.

Real estate experts and analysts suggest that many people are unable to buy a home. Therefore, the rental market is expanding and with it the rent charged for a rental unit.

“Investors plan to increase their holdings in single-family homes to strengthen their positions during times of high rental demand,” according to a Jan. 6 article on The Niche Report website, a magazine that reports real estate news.

For the housing market to be healthy, first-time homebuyers generally should account for 40 percent of all home purchases. Now they are priced out of the market because investors bid against each other, driving up the price of a unit, according to the NAR report.

In March 2009, 53 percent of all homebuyers were first-time homebuyers, after which the numbers fluctuated between 31 percent and 51 percent until July 2010. From that time onward, first-time homebuyers consistently accounted for less than 40 percent of all homebuyers, dipping to 29 percent in January 2011. The numbers fluctuated, but still stayed below 40 percent. In November 2012 and December 2012, first-time homebuyers accounted for 30 percent of all homebuyers.

“What I hear in the mainstream media about the rebound in the U.S. housing market isn’t very convincing to me. In reality, we don’t have any real growth in the U.S. housing market—only speculation,” a Jan. 25 article on the Profit Confidential website states.
The Epoch Times publishes in 35 countries and in 21 languages. Subscribe to our e-newsletter.




   

GET THE FREE DAILY E-NEWSLETTER



Stock Info Market Monitor

Selected Topics from The Epoch Times

Martha Rosenberg