Analysts Say Chances Are Slim Of A Second Housing Collapse

While the one-two punch of unemployment and foreclosures is bound to deal a blow to recovery, the housing market should escape another knockout in 2010 — as long …

While the one-two punch of unemployment and foreclosures is bound to deal a blow to recovery, the housing market should escape another knockout in 2010 — as long as discount deals draw buyers and banks resist flooding the market with liquidation sales. Housing prices could even see an upswing in the year ahead, with the monthly decrease in home values now shrinking. See the following article from HousingWire for more on this.

The US housing market could be in for some serious trouble in 2010, but predictions of a second collapse are “exaggerated,” according to a report from Radar Logic, a real estate data and analytics company.

Housing values could significantly recover in the spring of 2010 as low prices attract a blend of owner-occupiers and investors. Heated bidding pushes up prices at foreclosure auctions, and the supply of new and existing homes is declining, according to the report.

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Radar Logic’s 25-MSA RPX Composite, which measures housing prices, dropped 0.7% in October – the smallest decline since 2005 for that time period. It also remains 30% below its peak.

The threat to the budding growth is the shadow inventory of foreclosures. According to the report, delinquencies have reached their highest peak in decades and the most bearish observers believe the inventory will flood the market once the government programs end, boosting supply and decreasing home prices.

But Radar Logic analysts side with those like Rick Sharga of RealtyTrac in saying that banks will slowly burn through the shadow inventory, releasing them gradually onto the market.

“Thanks to federal bailout money and a general improvement in their financial health, banks have been relieved of the urgent need to liquidate their assets. As a result, lenders and government entities like Fannie Mae and the FDIC have been able to curtail sales to raise prices and avoid recording losses on properties,” according to the report.

If the government and the banks can effectively solve the puzzle of mitigating foreclosures, Radar Logic says that home values could even go up in 2010. Of course, before calling an end to the recession, everyone will keep an eye on unemployment. Many believe the rates will peak in the next two or three quarters and decline. Once that happens, according to the report, housing demand with strengthen even more.

“While we are not out of the woods yet, our view is that housing is showing signs of stability, markets are showing signs of rational behavior and everyone is starting to understand the fundamental problems that brought us here,” according to the report. “As such, we think the bears are overdoing it.”

This article has been republished from HousingWire. You can also view this article at
HousingWire, a mortgage and real estate news site.

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