Is the housing news we’re getting good?
That’s the question the New York Times asked in an editorial this week. And if you look at some of the press releases that have been issued recently, you might think that the housing market has indeed turned the corner.
The National Association of Realtors announced that pending home sales (homes that are under contract but have not yet sold), reached a two-year high and existing home sales beat expectations (which, truthfully, were not very high at all).
Mortgage interest rates, according to the weekly Freddie Mac survey, are at or near an all-time low. On the other hand, the number of people actually applying for a purchase mortgage is extremely low as well. It’s tough getting approved for one of these super-low interest rate mortgages.
According to the Standard & Poor’s/Case-Shiller housing price index, home values fell 4 percent nationally. Home prices nationally have now been rolled back to where they were in 2002, although it feels more like the late 1990s in Atlanta, where home prices fell nearly 13 percent last year.
And new home sales, which have helped lead the way out of countless recessions since World War II, remain at an all-time low. Home builders aren’t building that many more homes and selling even fewer of them, as supply continues to outpace demand.
What about foreclosures? Nearly 25 percent of all existing homes in the most recent quarter sold were foreclosures and Moody’s Analytics says there are 3.3 million homes currently in foreclosure. Another 11.5 million could fall into foreclosures if the economy worsens again.
And then there is the government’s response to the housing crisis. Thus far, the various Making Home Affordable programs haven’t done much to help the housing market form a bottom, let alone cure the problem.
This week, Federal Housing Administration announced it would reduce costs for a streamline refinance for those homeowners who have FHA loans. The problem many borrowers are having is that the increased loan origination and refinancing fees mean it’s difficult for lenders to “prove” that a borrower will save money on a refinance. Strict rules prohibit lenders from refinancing a borrower who won’t save money. The same announcement offered extra help to servicemembers and veterans who are trying to refinance or who were wrongly foreclosed on.
Based on all of these announcements, if you were in the business of making a housing market prediction, would you be forecasting good real estate news?
Perhaps not yet. But the real estate community is so weary of its depression-like status, and so eager to prove that with a positive attitude anything can happen that the “good news” is being heavily promoted as the beginning of the turnaround.
The biggest problem is that the real estate industry isn’t like the stock market. You won’t see values bouncing back to new highs after just a few months, or even a few years. With some industry observers predicting another 5 to 10 percent drop in home values in 2012, it could be a decade or more before the real estate industry really recovers.