Despite the continued steep unemployment in the United States, the homes for sale rose rather surprisingly in June of this year. According to experts, some people were simply seeking to take advantage of the lower housing prices as well as lower interest rates on borrowing.
Though this does not mean that the housing market is recovering as fast as hoped, it does suggest that some people are still buying.
Though uncertainty remains high as do cancellation rates, the prospects for a market recovery in the housing area would seem a little brighter with these numbers.
Predictions from the Bloomberg surveys had sales estimated to be anywhere from five percent lower to seventeen percent higher. Instead the sales for June rose 17% from the previous year.
May likewise saw an 8.2 percent gain though economists are still forecasting a drop of up to 2 percent in the coming months.
Though, the actual numbers suggest that things are a little better than predicted, there is still quite a bit of cause for concern.
Unemployment remains higher than nine percent and this alongside the fact that there are now stricter underwriting standards means that some of the forecasted sales may not translate into actual closings. Cancellations may become more frequent thereby diminishing some of the projected numbers.
While the S&P Supercomposite Home Builders Index was up 3.6 percent at the end of July, there remains weaknesses in the economy. According to economic officials, the ground remains shaky.
Nevertheless there is still some cause for cautious optimism. The labour market is starting to improve as first time applications for unemployment benefits declined and saw the fewest applications since April.
Consumer confidence remains very low however. According to the Bloomberg Consumer Report, only six percent of Americans surveyed believed the economy was in good shape.
Despite this pessimism, obviously some people are nevertheless taking advantage of lower housing costs. Pending sales went up a by 6.4 percent in the West of the country and by almost four and half percent in the South. Though the Midwest and Northeast saw only modest rises of 0.4 percent.
The falling prices of homes while benefiting some tend to hurt overall confidence in the market. Because home appraisals are being skewed by this, lenders are put in a difficult position when it comes to gaining accurate numbers. Here the marketing for mortgage lenders should be improved.
The difficulty with appraisal values has a cumulative effect on the market. It also causes many deals to fall through. When a home is appraised for much less then listed, the lender approves less money for the borrower. This affects the entire transaction and often causes the deal to completely disintegrate.
Under these circumstances cancellations also become much more likely. When the values that are listed are not the same as those offered by the appraisals the whole deal can go south very quickly.
Almost a third of all the closings in June were also found to be what are termed ‘distressed deals’. These are deals in which the houses are under foreclosures or short sales.
In these cases the lenders allow for the transaction to take place in which the sale is actually less than the balance on the mortgage. These type of sales made up thirty percent of the closings.
Overall, home sales have fallen since peaking in 2005. This was shortly before the subprime-mortgage crisis. The boom time was then proceeded by a thirty year low in existing home sales, since people can simply buy their houses and hire a moving company to get help relocating.
The delays in processing defaults will moreover mean that some of this bad news will continue on into next year. As many as one million foreclosures will be pushed into 2012 or later. As such, the housing market will remain under the cloud of these foreclosures for at least a year and maybe more.
This foreclosure delay may unfortunately work to keep housing prices dropping without reaching their true bottom for some time. As such, a high supply is continued to be expected.
Even homebuilder organizations are not pinning their hopes on things getting any better any time soon. Until the foreclosure pipeline gets cleared up and things reach a bottom, the housing market will remain pretty weak.
Extra reference: Perth Home Insulation Specialists – Insulwest 08 9470 1280.