U.S. Housing Market: Improving... at Last
At the risk of making the understatement of the century, the last five years have been brutal ones for this country’s housing market. If you’re like me, you’ve been wondering if you would ever again hear good news coming out of the single-family residential sector.
Well, some good news is here, according to guests on “America’s Commercial Real Estate Show.” Some of the nation’s most respected experts agreed that housing has finally begun to show some significant signs of improvement and is poised for a “slow,” but possibly unsteady and bifurcated recovery in the months and years ahead.
Single-housing starts have increased 20 percent compared to this time last year, said Brad Hunter, chief economist with MetroStudy, which tracks housing conditions in 84 metropolitan areas across the country.
Furthermore, single-family home absorption has increased 12.4 percent during that same timeframe, he added. “So that’s a good sign,” Hunter said. “It means people are feeling more confident and getting past the problems with financing.”
Additionally, home values have increased ever so slightly, although many markets around the country continue to really struggle. “When you look at the [pricing] average, it’s kind of like the old thing about a guy that’s standing there and he’s got one hand on the refrigerator and one hand on the stove, and he says, on average, he’s just right,” Hunter said.
MetroStudy’s chief economist did point out another dichotomy plaguing the housing market: although a whopping 1 million developed lots are awaiting purchase by builders, lots in close-in, A and B locations are in high demand by builders, who are often engaging in bidding wars for those sites. However, there is virtually no demand for developed lots in the far-flung suburbs, hence the huge supply.
Robert O’Brien, a partner at Deloitte & Touche who heads the firm’s U.S. real estate services practice, largely echoed Hunter’s views, noting the S&P/Case-Shiller Housing Price Index rose 0.7 percent in April. He also said his firm has observed an improved transaction volume, declining home inventories and shorter sell times.
“It’s going to be slow and unsteady but we expect to see improvement throughout the remainder of 2012 and into 2013,” O’Brien said.
Looking ahead, O’Brien suggested that a rise in interest rates could cause a short-term surge in home sales as buyers look to lock in lower rates. Over the longer haul, however, a rise would have a dampening effect on transaction volume, he said.
Unexpected Words of Optimism
Steve Palm, president of Smart Numbers, is one of my favorite guests, but not many in the industry would accuse him of wearing rose-colored glasses.
So imagine my surprise when he voiced considerable optimism about the housing market. “We’ve had five straight month-to-month increases in new home construction, and we have not seen that since 2006,” he said. “That’s just a great, great, great indicator, and I expect that trend to continue.”
However, the housing market is going to need some help to get truly untracked, Palm added. “For the housing industry to really keep this momentum, the economy has to improve -- bottom line,” he said.
Meanwhile, Todd Thrasher, a managing partner with Brooks Chadwick Capital, noted that buyer motivation has increased in recent months, and he said homes in A locations and in the $400,000 to $1 million price range are seeing significant activity.
“It feels good to finally feel good about housing,” Thrasher said. I agree. Let’s all hope the housing market continues to improve. We can use the jobs and the spending.
Steve Palm also shared his opinion on how the presidential election results will affect the housing market. You can hear his comments and housing market predictions on the show podcast. The show on the U.S. residential housing market is available for download now.
President, Bull Realty, Inc