From the insider:
“Most economists are more optimistic than I am,” noted Ivy Zelman, CEO, of the research analytics firm. Zelman spoke Wednesday about the future of housing at a Dallas loss mitigation conference sponsored by SourceMedia.
While affordability is at record levels, consumers’ balance sheets are hurting, she noted. Before the housing crash, from 2002-2006, home prices rose 28 percent while income grew only 13%, she said.
The good news, Zelman noted, is that affordability (deflation) has brought investors back into the market.
“I call it ‘Investors Gone Wild Part Two.’ For homes under $100,000, about 50% are cash purchases.” As a result, there is less risk around these investment purchases than previous ones that included exotic securities. Nonowners represented about 11-12% of purchase mortgages in Q110, she said.
Once the home becomes more expensive, investors with cash become scarcer. For homes priced from $150,000-$249,000, only 21% are cash sales, she said.
“I say, thank God for the investor.” If we didn’t have the investor, we wouldn’t have the absorption of the housing stock.
Problems compounding the housing market include the continued tight lending market as banks hoard their capital due to large numbers of nonperforming loans and problem balance sheets. They’ve tightened underwriting standards even for those with good credit who wouldn’t have had any problem getting a home loan before the housing crisis hit, she said.
Lending won’t pick up again until bank failures have peaked, Zelman predicted, but didn’t say when she thought that would be.
To illustrate the magnitude of the problem, Zelman noted several times during her talk the 4.45m homeowners who are 90-plus days delinquent on their mortgages. While Zelman doesn’t expect all of those homeowners to lose their homes, estimates from servicers are that as many of 80% of those eventually could lose their homes.
“There will be a continuous flow of foreclosures for several years,” she said.
JtR note: I disagree with her comment in bold. During the heyday of the subprime-REO liquidation of 12-24 months ago, there were plenty of owner-occupier buyers who got beat out by cash investors. Today on the lower-end, the investors are drying up because the list-prices are higher, yet owner-occupiers are still buying.