Posts Tagged ‘Recession’
How Housing Plays Politics in 2012
Housing may have been the catalyst for the Great Recession, but it is not number one on America’s fix-it list for our next President.
Mortgage Delinquencies ‘Turn a Corner’
Fewer Americans are falling behind on their mortgage payments; in fact, the fewest in two years. Mortgages just one payment past due (30 days) fell to their lowest level since just before the recession began.
Florida population grows again
After declining for the first time since the end of World War II, Florida’s population grew once again last year, a hopeful yet tentative sign that the worst of the recession may have passed, according to the latest preliminary population estimates from the University of Florida (UF). Stan Smith, director of UF’s Bureau of Economic and Business Research, estimates that Florida added a modest 21,000 residents between 2009 and 2010, but that follows a population decline greater than 56,000 between 2008 and 2009. “Even though the state turned it around, it still represents the smallest population increase since the 1940s and does not make up for last year’s loss,” Smith said. “Florida’s population growth continues to be very, very slow by historical standards.” Florida grew by more than 125,000 residents in every year from 1950 to 2008. It’s estimated that Florida added 21,285 residents during the past year, with its total population increasing from 18,750,483 on April 1, 2009, to 18,771,768 on April 1, 2010, Smith says. The previous year it lost an estimated 56,736 residents. “Two years ago, the economy was deteriorating rapidly, while over the past year there have been some signs that it is leveling off or even improving slightly,” he says. “I think that’s the reason we’re seeing a small increase in population. Although technically the recession has ended, the economy continues to be in bad shape, particularly in terms of its ability to create jobs. There have been some jobs added in the last few months, but unemployment is still very high and job growth is very weak.” Slightly more counties lost rather than added population, but the split was fairly even. In percentage terms, both increases and decreases in counties’ populations were generally very small, with no dramatic changes. “At the state level, foreign immigration continues to be relatively strong, and the state also continues to have substantially more births than deaths, which are really the drivers of Florida’s growth in the last year,” Smith says. The largest population gains were in some of the biggest counties. Miami-Dade led by adding an estimated 8,253 residents, followed by Hillsborough, 6,353, and Broward, 5,834. “Because they’re the largest counties, they have fairly sizeable numbers of births,” Smith says. “They also receive a substantial number of foreign immigrants.” The county with the biggest percentage increase was Lafayette, which grew by 5.2 percent, but that change was largely attributed to the addition of state prison inmates. There was no pattern to which counties lost population, which were spread throughout the state and include both large urban counties and small rural counties. The largest population decline was in Seminole County, which lost 3,659 residents, followed by Pinellas, 3,119, and Volusia, 2,055. In percentage terms, the county with the biggest decline was Glades, followed by Jackson and Holmes. With a quick economic turnaround unlikely at either the state or national level, Smith expects Florida’s population to continue to grow slowly during the next year or two. But within the next 10 to 20 years, the state’s annual population growth could be as high as 250,000. “From 2003 to 2006, Florida’s population grew by more than 400,000 per year, and in the previous three decades increases averaged about 300,000 per year, although there were certainly ups and downs from year to year,” he says. Last year’s population decline, a result of the economic slump, was the first since 1946, when military personnel left the state at the end of World War II. “If the economy recovers sooner than people expect, we would expect faster growth,” Smith says. “If it recovers less rapidly or even slips back into recession, we would expect that growth will continue to be very slow and possibly even be negative again.” Between 2000 and 2010, the counties that grew the most in absolute numbers were Miami-Dade, Orange and Hillsborough. Flagler had the highest growth rate, 90.4 percent, followed by Sumter, 82.6 percent, Osceola, 59.8 percent, St. Johns, 50.6 percent, and Wakulla, 41.7 percent. The population figures are interim estimates that will be replaced by numbers from the 2010 census when they become available early next year. © 2010 Florida Realtors®
Americans’ economic confidence ticks up slightly
Americans’ confidence in the economy improved slightly in August, but the mood is still gloomy amid job worries, according to a monthly survey. The Conference Board said Tuesday that its Consumer Confidence Index now stands at 53.5, up from a revised 51.0 in July. Economists surveyed by Thomson Reuters had expected 50.5. The increase comes after two straight months of declines. It takes a reading of 90 or more to indicate a healthy economy – a level not reached since the recession began in December 2007. The index – which measures how Americans feel about business conditions, the job market and the next six months – had been recovering fitfully since hitting an all-time low of 25.3 in February 2009. But August’s reading suggests that American confidence hasn’t improved from a year ago, a bad sign for the economy and for retailers, which have been grappling with a weak start to the back-to-school season. Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. But worries are rising the economy is growing too slowly to support sustained job growth, and some are concerned it could fall back into a recession. “The comfort in (August’s confidence figures) is that confidence did not fall further,” Paul Dales, U.S. economist at Capital Economics, said in a statement. “But there are few signs that households will ramp up their spending. High unemployment, widespread negative housing equity and low share prices are keeping households on the sidelines.” Still, investors, bombarded by piles of bad news about the economy, seized on the bigger than-expected increase in August’s confidence figure. The Dow Jones industrial average is up 22, or 0.2 percent, at 10,032 Tuesday morning. The S&P 500 is up 1, or 0.1 percent, at 1,050. Stocks have been pummeled throughout the month because of uncertainty over signs of slowing growth. Meanwhile, a widely watched home price index reported that home prices rose in June for a third straight month as now-expired tax credits inspired a burst of homebuying. But prices are expected to fall through the rest of the year now that demand has faded. The slight improvement in August’s Consumer Confidence Index was boosted by shoppers’ improved outlook over the next six months. That gauge rose to 72.5 from 67.5. The other, which measures how consumers feel now about the economy, decreased to 24.9 from 26.4. “Expectations about future business and labor market conditions have brightened somewhat, but overall, consumers remain apprehensive about the future,” said Lynn Franco, director of The Conference Board Consumer Research Center in a statement. New figures issued Friday show the economy is weaker than expected, and the outlook for the rest of the year is looking bleaker. The Commerce Department reported that gross domestic product grew at a 1.6 percent rate for April through June. The initial estimate was 2.4 percent. Home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent. The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday posted a 1 percent increase in June from May and was up 4.2 percent from a year ago. Home prices nationally were up 4.4 percent in the second quarter compared with the first quarter. That was largely because buyers could take advantage of government tax credits of up to $8,000. Home sales have dropped sharply since those incentives expired. Lending standards remain tight, and unemployment is stuck near 10 percent. Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years. It marked the largest monthly drop in the four decades that records have been kept. Meanwhile, the Commerce Department reported that sales of new homes fell 12.4 percent in July from a month earlier. July’s pace was the slowest in at least 47 years. Economists will closely watch Friday’s reading on job figures for August, but they’re bracing for more bad news. Economists surveyed by Thomson Reuters expect overall nonfarm payrolls to drop 100,000 jobs in August, dragged down by government cutbacks on the state and local level. Private employers were expected to add 54,000 jobs, which would mark the fourth straight month of tepid gains. Given the scenario, the unemployment rate is slated to tick up to 9.6 percent from 9.5 percent. Against this background, consumers are waiting for the best deals and buying fashions that they can wear right away for the fall season. And stores don’t expect shoppers to start spending anytime soon. The Conference Board survey, based on a random survey mailed to 5,000 households from Aug. 1 to Aug. 24, showed shoppers remain worried about jobs. Those saying jobs are “hard to get” increased to 45.7 percent from 45.1 percent, while those claiming jobs are “plentiful” declined to 3.8 percent from 4.4 percent. Those expecting more jobs in the months ahead increased to 14.6 percent from 14.2 percent, while those anticipating fewer jobs decreased to 19.4 percent from 20.9 percent. Copyright © 2010 The Associated Press, Anne D’Innocenzio, AP retail writer. AP Real Estate Writer Alan Zibel in Washington contributed to this report
Feds: Economy edges closer to stalling
The economy turns out to be weaker than we thought, and the outlook for the rest of the year is now looking dimmer. New figures issued Friday show the economy struggled this spring, growing at a meager 1.6 percent annual pace. The initial estimate was 2.4 percent, and even that was anemic. Analysts say the summer should be disappointing, too. Shortly after the government’s revision, Federal Reserve chief Ben Bernanke said the Fed was ready to take additional steps to prevent a second recession if the economy deteriorates further. But he stopped short of promising any action. The Fed “will do all that it can to ensure continuation of the economic recovery,” he said. Several economists said they expected the economy to keep growing slowly for the rest of the year. That would almost certainly not be enough to bring down the jobless rate, already at 9.5 percent, and unemployment could actually increase. The performance is “very disappointing,” said Ethan Harris, an economist at Bank of America-Merrill Lynch. “Usually you get a bigger bounceback.” In the first quarter of the year, the economy grew much faster, at a 3.7 percent pace. Since then, though, the housing market has slumped after the expiration of a homebuyer tax credit, and business spending and manufacturing activity are both cooling off. Bernanke, speaking to a Fed conference in Jackson Hole, Wyo., acknowledged the economy has slowed more than policymakers had anticipated and said it is “vulnerable to unexpected developments.” He did say he expects growth will pick up next year. The central bank chairman also sought to reassure the financial markets that he has the tools needed to bolster the economy and will use them if business activity slows further. Bernanke outlined several options, including having the Fed buy more securities, most likely government debt or mortgage investments, as a way to drive down interest rates on all sorts of debt and spur more spending that might get the economy going. Bernanke made clear “he is willing to act to ensure that the recovery remains on the right path,” said Zach Pandl, an economist at Nomura Securities. That reassured the financial markets, which rose sharply after the Fed chairman’s speech. The Dow Jones industrial average finished 164 points higher and back over 10,000, and broader markers registered solid gains. Wall Street looked past a disappointing statement from computer chip maker Intel, which said it was cutting its sales forecast for the quarter after sensing weaker demand from customers in the U.S. and Europe. A little more than a month ago, Intel reported its biggest quarterly profit in a decade. How much the government could help at this point is an open question. The Fed has already lowered its key short-term interest rate to nearly zero, but that has yet to rejuvenate the economy. The benefits of federal stimulus programs are fading, and Congress has declined to pass any major new aid. Bernanke said the prospect of high unemployment for a long period is a central concern for the Fed. He also made clear that he is determined to prevent the United States from slipping into a deflationary spiral – a prolonged drop in wages and prices. The Fed chief said the foundation is being laid for stronger growth in 2011: Households are saving more and healthier banks are more willing to lend. That should boost consumer spending, which makes up 70 percent of U.S. economic activity. Corporate profits and personal incomes also rose in the second quarter, noted Rebecca Blank, undersecretary for economic affairs at the Commerce Department. “There is some good news here,” she said. “Those are the things that will fuel a longer-term recovery.” Still, the report for April to June showed that economic growth was reduced by a surge of imports in June and a smaller buildup in business inventories than previously estimated. Without the trade deficit, the economy would have grown at a healthy 5 percent pace. Instead, the gap essentially subtracted 3.4 percentage points, the biggest hit from a trade imbalance since 1947. Business investment in new machinery, computers and software rose nearly 25 percent, driving much of the growth last quarter. But much of that spending was on goods from other countries – a 32 percent increase in imports, the most since 1984. Bernanke and many private economists seem to think that was mostly an aberration. As businesses pare back their spending on inventories and reduce investment in new equipment, imports should decline and come more into alignment with exports, they say. Americans personally spent a bit more in the second quarter than previously calculated. Their spending rose at a 2 percent annual rate, above the 1.6 percent estimated last month. The government’s report measures the gross domestic product, which covers goods and services from autos to haircuts. Friday’s report is the second of three estimates the government makes each quarter. Copyright 2010 The Associated Press, Christopher S. Rugaber, AP Economics Write
Tampa ranks last in economic study
The good news about the Bay area's economy is there's nowhere to go but up. The bad news: We rank dead last for now. Thursday, the Tampa Bay Partnership economic development agency released its economic scorecard for the region for summer. The twice-yearly report compares the Bay area with five other big Southeastern cities on economic factors: Raleigh-Durham, N.C.; Dallas; Charlotte, N.C.; Atlanta; and Jacksonville. Things didn't go well. The Bay area ranked sixth out of the six cities overall. Tampa had finished third in the study the last time the Tampa Bay Partnership looked at the six cities, during fall. The last time Tampa ranked last was in summer 2008. Among the factors dragging down the area this time were its low wages, high unemployment and relatively low spending on transportation. Raleigh-Durham ranked first in Thursday's study, as usual, because of its strong education system and high-tech industries. It was followed in order by Dallas, Charlotte, Atlanta, Jacksonville and the Tampa Bay area. Stu Rogel, the partnership's chief executive, said the Bay area is having a harder time recovering from the recession than most areas, and unemployment is unacceptably high. It needs to improve its job market, transportation system and other infrastructure to move up a spot or two in the rankings. For now, it shouldn't set out to beat perennial leaders Raleigh-Durham and Dallas, he said. The scorecard considers the Bay area the following eight counties: Hillsborough, Pinellas, Pasco, Polk, Manatee, Sarasota, Citrus and Hernando. It can be found at www.tampabay.org/documents/2010%20SUMMER%20SCORECA.... Among the highlights (or lowlights) of the ranking are: •Employment and Workforce. The Bay area ranked fifth in this category because of its high unemployment rate and its hemorrhaging of jobs. For example, the average unemployment rate in the eight-county Bay area was 13.1 percent during the study period - the worst among the six cities. •Housing. The Bay area brought up the rear in this vitally important industry. For example, renters in the Tampa area are paying a bigger share of their paychecks on housing than in other cities. Locally, renters pay about 22.3 percent of their yearly household incomes on a two-bedroom apartment. That's more than in the other five cities. Rent is most affordable in Charlotte, where renters pay just 17.1 percent of their annual household incomes on apartments. And while people have taken out more housing permits in the Bay area recently, other cities are growing more quickly. For example, permits were up 12 percent in the Bay area in the first quarter of this year, when compared with last year. But that's good for only fourth place. In Atlanta, permits were up 60 percent over the year. •Transportation. The Bay area ranked only fifth in the transportation category, which measures commute times and distances, the use of mass transit and government expenditures on transportation. Only 1.8 percent of the Bay area's population uses mass transit, the study says. In Atlanta, 7.1 percent of the population uses it. In any discussion of transportation, the plan to create a light-rail system is bound to rear its head. In November, voters in Hillsborough County will decide whether to pass a 1 percent sales tax to fund light rail, more bus service and other transportation projects. In fact, Rogel, the partnership's leader, suggested light rail could help boost the area's economy by improving its infrastructure. The partnership has been a big supporter of light rail, but a Tampa Bay Partnership spokeswoman said the group's new economic scorecard was unbiased and wasn't pushing any opinion for or against rail. Among the partnership's conclusions was that the Bay area plans to spend relatively little money on transportation projects per resident, about $253. That ranks it fourth among the six cities. The Tribune was not able to independently verify that figure Thursday. Mark House, a developer and chairman of the Tampa Hillsborough Economic Development Corp., also said rail could boost Tampa's economy. "We are woefully behind in public transportation, light rail, bus service and express traffic lanes," House said. "That's all the more reason to say we need good transportation." A well-known opponent of light rail, Hillsborough County Commissioner Al Higginbotham said he hadn't seen the partnership's economic scorecard and couldn't comment on it Thursday.
Nearly 50 percent leave Obama mortgage-aid program
Nearly half of the 1.3 million homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out. The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday’s report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say. More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year. “The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” said Mark Zandi, chief economist at Moody’s Analytics. Besides forcing people from their homes, foreclosures and distressed home sales have pushed down on home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting their homes on the market. Approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the government program have been cut loose through July, according to the Treasury report. That’s about 48 percent of the ones who had enrolled since March 2009. And it is up from more than 40 percent through June. Another 421,804, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time. RealtyTrac reported that the number of U.S. homes lost to foreclosure surged in July to 92,858 properties, up 9 percent from June. The pace of repossessions has been increasing and the nation is now on track to having more than 1 million homes lost to foreclosure by the end of the year. That would eclipse the more than 900,000 homes repossessed in 2009, the firm says. Lenders have historically taken over about 100,000 homes a year, according to RealtyTrac. Zandi said the government effort will likely end up helping only about 500,000 homeowners lower their monthly payments on a permanent basis. That’s a small percentage of the number of people who have already lost their homes to foreclosure or distressed sales like short sales - when lenders let homeowners sell for less than they owe on their mortgages. Zandi predicts another 1.5 million foreclosures or short sales in 2011. “We still have a lot more foreclosures to come and further home price declines,” Zandi said. He said home prices, which have already fallen 30 percent since the peak of the housing boom, would drop by another 5 percent by next spring. Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork. The banking industry said borrowers weren’t sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out. Obama officials dispute that they pressured banks. They have defended the program, saying lenders are making more significant cuts to borrowers’ monthly payments than before the program was launched. And some of the largest mortgage companies in the program have offered alternative programs to those who fell out. Homeowners who qualify can receive an interest rate as low as 2 percent for five years and a longer repayment period. Those who have successfully navigated the program to reach permanent modifications have seen their monthly payments cut on average by about $500. Homeowners first receive temporary modifications and those are supposed to become permanent after borrowers make three payments on time and complete all the required paperwork. That includes proof of income and a letter explaining the reason for their troubles. But in practice, the process has taken far longer. The more than 100 participating mortgage companies get taxpayer incentives to reduce payments. As of mid-June only $490 million had been spent out of a potential $75 billion the government has made available to help stem the wave of foreclosures. Copyright © 2010 The Associated Press, Martin Crutsinger, AP economics writer.
Office leasing rebound could be deceiving
The office property sector is witnessing a rebound in leasing activity. But that has not stopped some tenants from looking for ways to use less space per employee. Companies that sat on the sidelines during the worst days of the recession are increasingly making leasing commitments. In the year ended June 30, Studley reports, office tenants signed 161.3 million square feet in leases nationwide – a 5.7 percent increase over the 12-month period ended March 31. In many cases, though, tenants are taking less space than they had before. This is due to the reality that they have fewer employees, but it’s also because they have discovered how to use space more efficiently. In New York, for instance, three of the second quarter’s five largest deals involved tenants either taking the same amount of space or less. The Studley report reads: “Until tenants shift into expansion mode … the market will be engaged in a process of musical chairs.” This trend does not bode well for an office market struggling with a U.S. vacancy rate of 17.4 percent – the highest since 1993, notes Reis Inc. Analysts and brokers are especially concerned about the hundreds of office buildings that are in precarious financial condition due to the fact that they are worth less than the mortgages that were made during the boom times. Such properties have an intense need to fill space in order to boost rental revenue and, subsequently, values. “People should temper their expectations about how quickly office space will be leased up,” says Victor Calanog, research director for Reis. “Where there are leases being signed, companies are trying to be efficient with the space they’re using.” Source: The Wall Street Journal (08/19/2010)
1 out of 4 renters never plans to own a home
According to Trulia.com’s American Dream survey on attitudes toward homeownership, 27 percent of renters do not plan to buy a home – ever. Of those renters who do plan to purchase someday, 68 percent said it would be more than two years before they do. “Large numbers of people delaying their plans to buy a home, or not planning to buy at all, could have an enormous domino delaying effect on economic recovery in the U.S.,” says Pete Flint, CEO of Trulia. “Renters converting into buyers are crucial to turning around the housing slump, but the current economic crisis is causing people to become very hesitant to get off the fence and buy a home.” According to the study, many Americans still maintain a core belief in the inherent value of owning a home: 72 percent believe homeownership is part of their American Dream. While it’s a decline from 77 percent six months ago, it shows that the American Dream of homeownership is still alive. Nearly one in five Americans (19 percent) said that their attitude toward homeownership has grown more negative over the last six months; however, more Americans – 23 percent – said that their attitude toward owning a home has grown more positive in the same time frame. Tipping factors: From renter to buyer in one year Seventy-nine percent of renters who plan to buy homes one day said something could inspire them to buy a home within the next 12 months. The changes in circumstance most frequently cited as the “tipping factors” were: being able to save enough money for a downpayment, getting a new job, getting a promotion/raise, and interest rates staying low or getting even lower. The McMansion Era is over According to the survey, Americans are also veering away from the “McMansions” that grew popular before the recession. Adults who might buy a house displayed a preference for smaller homes, with only 9 percent saying their ideal home size is more than 3,200 square feet – the same number of who said they’d like their home to be between 800 and 1,400 square feet. Fifty-five percent of Americans would prefer a home between 1,401 and 2,600 square feet. Harris Interactive conducted this July 2010 survey online within the United States via its QuickQuery online omnibus service on behalf of Trulia between July 22-26, 2010, among 2,055 U.S. adults aged 18 years and older. The sample included 1,345 homeowners and 663 renters. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated.
The Housing Markets: Supply, Demand, and Current Issues
Every month the press is filled with commentary on the latest housing market figures. Some of the stories would benefit from additional perspective. In this month's “Behind the Numbers,” we focus on some of the housing market problems in the news: supply, demand, and the outlook. Of course, all housing is local, so the information needs to be considered in conjunction with knowledge of local market conditions Distressed Property and Shadow Inventories In the past year approximately 33 percent of existing home sales at the national level have involved distressed properties (foreclosures, short sales) selling at discounts of 15 to 20 percent from non-distressed market prices—exerting a major negative impact on overall market prices. There has also been concern over a potential shadow inventory of distressed properties: as of the first quarter of 2010 over 6.5 million homes were in foreclosure or had overdue mortgage payments. Possibly as much as 75 percent of the shadow inventory will ultimately be sold as distressed. However, given the ongoing time delays for problem resolution it appears that distressed properties will enter the market at approximately the current or a slightly increased rate for the next few years. Foreclosures are a major negative market influence in terms of price, consumer confidence, and expectations; however, a tsunami of shadow inventory appears unlikely. Potential Pent-Up Demand: Possible Longer Run Impact There are a variety of techniques for measuring expected housing sales based on economic factors, demographics, financial markets, etc. A simple trending of the existing home sales market based on sales rates during 1988-2000, a time period before the recent market run-up/de-leveraging/decline/recession situations, suggests a pent-up demand in the neighborhood of 15 percent relative to today’s sales. That is, existing home sales could be expected to be possibly 15 percent higher in a normal market. We are, however, far from a normal market, given that we have been through major financial de-leveraging, the Great Recession, and that consumer mood is at best shaky. A number of homeowners who have deferred listing their homes due to market conditions may also now reenter the market, resulting in increased home inventories as the economy recovers. Once the employment numbers improve, pent-up demand may help to increase sales. In the short run, however, we may actually see additional inventory on the market as a result of listings by deferred sellers. Housing Starts: Construction Rate Appears to be Below the Long Run Demand The supply of all types of new housing units has been reaching new lows, declining from single family starts at over 1.7 million per year in late 2004 to 454 thousand in June 2010. The demand for new housing units ultimately depends on family formations, sales for vacation homes, and replacements for units demolished or destroyed. Based on assumptions about demolitions and second homes, the graph indicates that in recent years, the projected demand for new homes has actually exceeded supply. Decreased new construction obviously makes major headlines in the short run; in the longer run it should help to bring the overall housing market into balance. Market Data Shows How Housing Inventory Impacts Prices There will always be an inventory of unsold homes on the market. An increase in the inventory of unsold homes indicates that there is an excess supply relative to demand. The graph shows how prices tend to rise as supply falls. During the first part of 2010 the months’ supply of inventory decreased from earlier highs—accompanied by stabilizing prices. In June, month’s supply increased to 8.9 months from the previous 8.3 months. If the increase proves to be a temporary adjustment due to pent-up listing of homes, then prices should continue to stabilize, particularly if employment increases. If inventory supply continues to increase without adequate job increases, the housing market will be subject to additional pricing pressures. Conclusions/Implications for REALTORS® The above comments provide a perspective on how the housing market is positioned to resolve its problems: First, the level of distressed sales is likely to continue for the next several years, negatively impacting prices and the new construction market at entry level. However, a tsunami of additional distressed property sales appears to be unlikely. Second, the existing home sales market appears to be below normal projected growth, apparently held back by employment problems and mediocre consumer mood. The data suggest that there is pent-up demand, but a greater economic recovery, particularly in jobs, appears to be necessary before the demand is unleashed. Third, new home construction appears to be below long-run demand. In the longer run this will reduce the total supply of homes on the market, working to firm up prices. Fourth, the inventory of existing homes on the market in June was approximately 8.9 months, an increase in housing inventory, possibly due to additional listings developing as the market starts to recover. An increased inventory at this point could become a negative for prices unless an expanded economic recovery releases some pent-up demand. Assuming that the economy is not hit with a “double dip” recession, all of the data seem to indicate favorable prospects for sales—unlikely to decrease in the short run, positioned to increase once the economy adds additional jobs. In the case of prices, there are no indicators of major changes either way unless the inventory of unsold homes increases significantly. At the local level, areas with stronger job recovery, improving economies leading to fewer foreclosures, and local economies able to unleash additional pent-up demand should experience somewhat greater improvement. The comparison of local numbers (jobs, foreclosures, short sales, inventories, etc.) with national numbers provides a context for the evaluation of specific markets.
