Does seeing articles like this cause buyers to get in the game? From Albert Bozzo at cnbc.com:
In some metropolitan areas, the market has bottomed, with both sales and prices on the rise and foreclosures on the decline.
This contrarian — and largely overlooked — thesis flies in the face of the persistent gloom that has nagged the industry since 2007, when the subprime crisis flared.
Industry analysts and players cite a number of reasons — some traditional (employment), others unique to the post-credit bubble era (foreclosures) — for the long-awaited sea change. An analysis of industry and government data also support the forecast.
Proponents admit that the nascent rebound could easily be derailed, but stress that after years of government efforts to support sales and prices as well as the volatile impact of foreclosures, the market has regained a measure of normalcy.
“With the exception of really hard-hit markets, the vast majority is ready to turn around,” adds Jerry Howard, president and CEO of the National Association of Home Builders. “The Washington, D.C., area is not only ripe for recovery, they need to start building units.”
Nevertheless, skeptics overwhelmingly outnumber the optimists, given the false-starts of previous years, the economy’s sub-par performance, a new wave of distressed properties and the capacity for the European debt crisis to spook business, consumers and investors.
“I think it’s premature,” says Richard Smith, CEO of Realogy, the nation’s largest real estate company, whose brands include Century 21, Coldwell Banker and Sotheby’s International. “We see little indications here and there. Transaction volume is improving. Prices are still under pressure. This isn’t going to be one of those spiked robust recoveries.”
Smith is echoing the conventional industry calculus: that price increases follow sales growth amid consistently strengthening demand.
The catalysts to recovery are mostly the same: for potential buyers, residential rents have now risen enough to consider buying; existing-home inventory is the lowest in five years, while that of new homes is at a 40-year low; affordability is at a record high; delinquencies have peaked; consumer confidence is on the rise ; and job growth is accelerating.
For investors, with a continuation of the gold rally in question, real estate is beginning to look like a viable inflation hedge alternative, while rising rents mean greater profits.
Finally, there’s the intangible fatigue with bad news, and a desire to end the negative feedback loop.
A turnaround in the housing market will require continued improvement in the job market. The economy has created jobs 13 months in a row for a total of almost 1.9 million. Weekly jobless claims have been routinely below the key level of 400,000, and the national jobless rate is down to 8.6 percent.
There are already signs in some markets that an improving employment picture is boosting housing demand and sale prices.
In San Diego — where in the last year the jobless rate has fallen from 10.4 percent to 9.7 percent and 24,000 jobs have been added — home inventory is down to two months; in some areas of San Francisco (9.4 vs. 10.3 percent), it is one month.
“There’s a ready appetite for it,” adds Smith of Realogy, who agrees that there’s substantial pent-up demand for housing in general but also great uncertainty. “If you can relieve consumers of some of that uncertainty, then I can see a nice little recovery.”
That’s the psychological dimension of the wild card — the negative feedback loop that has plagued housing.
Optimists say most of the uncertainty and fear is gone. “The major driver of negative sentiment was that prices were going down across the market by large amounts,” says Kim of Barclays. “Buyers need to see a stabilization.”
A contributing element to that is the unwinding of government intervention — whether to artificially spur demand — as was the case with the first-time buyer tax incentive program of 2009 and 2010 — and/or to retard and prevent foreclosures.
Many regard those efforts as largely ineffective, if not counter-productive because they delayed the inevitable — a deep descent to a market bottom, which has finally been touched.
“The numbers you’re looking at you can trust,” says Kim. “There are no exogenous factors.”
Though tight lending conditions and forthcoming regulations of the Dodd-Frank legislation are still an issue for some, sweeping housing finance reform is off the agenda for at least the next year.
“You’re back to the natural forces of the market,” says Howard of the builders association.