Signs For Optimism In the Housing Market?

Signs for optimism in the real estate market? Some say yes, some say no. The fact there is even a chance for optimism signals we’ve definitely entered a …

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Signs for optimism in the real estate market? Some say yes, some say no. The fact there is even a chance for optimism signals we’ve definitely entered a new phase of the economic crisis. The crash of the housing market is now being viewed in terms of ‘recovering,’ as opposed to an eternal free fall. While investors turn to firms like the World Financial Group for sage advice, what can we take from the change in tune? Positive signs or negative signs?

There is plenty of optimism and pessimism to go around for everyone in regards to the (possible) recovery of the real estate market. In a recent editorial for CNBC, analyst Michael Yoshikami takes his readers on a quick roller coaster ride of emotion. He began his article pointing to strong housing starts at the end of May that were signaling positivity from home builders. Michael quickly qualifies this statement by suggesting that while the market may be improving, or “stabilizing,” we can’t call it a recovery because it’s far from where it was before the crash.

First dip in the roller coaster. We go upwards with positive signs and then abruptly back down to negative reality. The article then points at sales increases reported by both KB Homes and Toll Brothers. Reason for optimism? No, not really. The reality in the real estate market goes beyond temporary home sales increases; it points to a fundamental absence of buyers and an abundance of sellers. Indeed, most people have noticed that in neighborhoods across the country homeowners are trying without success to sell their properties. Asking prices just keep dropping and dropping…

Another dip in the roller coaster, but this time it doesn’t level out—it keeps going down. Michael points out that because of the huge amount of people who want to sell their homes right now, as soon as there is any semblance of a market recovery this backlog of unsold homes will sweep over the market, diluting capital values. Worse, most major banks are still backlogged with additional foreclosed homes that the market will still have to contend with even after an economic recovery. Not only are these homes devaluing neighborhoods across the country, they are making banks act as “wholesalers.”

The last roller coaster dip comes when Michael talks of relaxed Federal Reserve policies regarding inflation that some analysts say will bolster the real estate market as well as other assets. But Michael says there is too much supply for inflation alone to compensate. He says either the surplus homes must be liquidated, or we are in for a very gradual recovery. He suggests years, though between the lines one can sense he may mean decades. 

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