US housing recovery could be a decade away according to at least one expert, with new and existing home sales well below peak, and the pipeline of distressed properties a continued threat. While the troubled housing market keeps weighing down broader recovery, builder sentiment is waiting on signals of economic health, and especially job growth. See the following article from Property Wire for more on this.
The beleaguered residential real estate market is expected to keep pushing the US economic recovery down in the first six months of 2011.
Analysts at Bank of America Merrill Lynch expect GDP growth lower than the consensus estimate of 2% for the first six months of next year with better growth in the second half as a variety of uncertainty headwinds abate. For the full year, BofAML predicts GDP growth of 2% to 2.5% as core indicators of inflation weaken further.
In its global economic outlook for 2011, BofAML said the US economy remains vulnerable to premature fiscal tightening, commodity shock and a variety of other downside risks. Analysts expect growth to inch back up to 3% in 2012, but a true rebound remains a long way off. Senior US economist Michelle Meyer said ‘it could take nearly a decade’ for the housing market to return to some sense of normal.
New home sales are down 80% from their peak and existing home sales are off 40% according to BofAML, which anticipates sales to remain muted before starting to climb in the middle of next year.
Analysts project real estate prices could fall another 5% through in the first half of 2011 because of slow jobs growth and the residual effects of the foreclosure fiasco that plagued the industry in 2010. And BofAML expects the foreclosure problems to have a negative effect for several years.
Prices will be hurt by the nearly 2.3 million mortgages BofAML expects to wind up as distressed sales over the next year and half. Then there is another 2.2 million of seriously delinquent mortgages and roughly 3.8 million homes for sale. Analysts do believe the delinquency rate has peaked, but it is likely to fall gradually due to slow jobs growth that will keep the number of new foreclosures high.
Meanwhile a separate report shows that property builder confidence remained flat in December as builders brace themselves for a slow holiday season. The National Association of Home Builders/Wells Fargo Housing Market Index remained unchanged at 16 after increasing slightly in November.
The index measures builder perceptions of current single family home sales and expectations for the next six months. Any number over 50 indicates that more builders view conditions as good. Bob Jones, chairman of NAHB, said that while the HMI is adjusted for seasonal factors, such as the typical slowdown due to cold weather, sales activity is breached by ongoing weakness in the job market and the rising number of foreclosures.
‘The steady but low level of the HMI reflects the fact that builders and consumers have yet to see consistent signs that the economy is improving. The good news is that the index and its subcomponents remain above recent lows from the early fall,’ said NAHB chief economist David Crowe.
Two out of the three sectors of the HMI remained unchanged from November. The current sales condition index stayed at 16 and the six month sales expectation index stayed at 25. The index measuring how builders view the traffic of prospective buyers fell one point to 11.
There are regional variations. Home builders were the most confident in the Northeast at an index of 24, followed by the South at 17, the Midwest at 13 and the West at 11.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.