It seemed like last week it was the threat of a shadow inventory of foreclosed homes that was slowing the recovery, but now experts are saying the culprit is low inventory. High-volume investor action, a drawdown in foreclosure processing and the inability of underwater homeowners to put their properties on the market is leaving many prospective buyers without purchase options. These limits combined with tightened credit restrictions have been enough to stall the recovery despite favorable interest rates and an uptick in National Association of Realtors Pending Home Sales Index. For more on this continue reading the following article from TheStreet.
The number of home buyers signing contracts to buy existing homes jumped nearly six percent in May to the highest level since April of 2010, according to a new report from the National Association of Realtors.
Back then buyers were rushing to beat the deadline for the home buyer tax credit. This spring buying surge was particularly strong out west where the NAR’s Pending Home Sales Index jumped 14.5%. Investors are driving the market out West, racing to buy distressed properties and take advantage of today’s very hot rental market.
Realtors say they expect total home sales for 2012 to be up around 10% from a year ago, but they caution that low inventory and tight credit, for buyers and builders alike, are holding the market back.
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The supply of homes for sale has dropped precipitously in the past year, as banks are slower to work through delinquent loans, investors are grabbing up foreclosures at a fast pace, and negative equity is making it impossible for many sellers to list their homes on the markets. Mortgage delinquencies are down to their lowest level in four years, according to a new report Wednesday from the Office of the Comptroller of the Currency (OCC). New home construction is still near record low levels, despite rising off its bottom.
"There may be a housing recovery because they’re not building any new houses," noted Jim Cramer Wednesday morning on CNBC’s "Squawk on the Street."
Public home builder Lennar , based in Miami, beat earnings expectations, with new orders up 40% in the second quarter. Pricing is also improving.
"Evidence from the field suggests that the ‘for sale’ housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process," noted Lennar CEO Stuart Miller in the earnings release. "The recovery process continues to be very localized."
Some analysts warn that while the spring season has been the strongest since the housing crash, there are still millions of delinquent loans to work through, which combined with negative equity and still-tight credit, could create a zig-zagged recovery at least through the end of 2012.
This article was republished with permission from TheStreet.