Real Estate and Housing Markets Still Weak

The real estate and housing markets continue to struggle despite some positive data in the last month. Some experts say they don’t expect the U.S. housing market to …

The real estate and housing markets continue to struggle despite some positive data in the last month. Some experts say they don’t expect the U.S. housing market to recover until at least 2013. While the markets look bleak, it does give opportunity for those buyers seeking historically low interest rates. See the following article from The Street for more on this.

Better-than-expected real estate data offered welcome news about the economy this month, but the housing market continues to bounce along the bottom, said Kevin Brungardt, CEO of RoundPoint Financial, a mortgage origination and servicing firm.

TheStreet spoke with Brungardt after data released in recent days showed that pending home sales rose 2% in December, new-home sales spiked 17.5% and existing-home sales rebounded 12.3%.

>> Housing Market to Recover in 2013: Analyst

He said the reports showed generally nice data points, especially that the supply of new homes for sale fell below the 7-month mark, but that "housing keeps plodding along toward a slow recovery" facing a number of headwinds.

Brungardt reiterated the usual suspects of headwinds facing the residential real estate market, namely high unemployment, potential buyers’ low confidence in the stability of home prices and the large inventory of distressed properties that still need to be cleared.

That list was virtually unchanged from when TheStreet spoke with the mortgage origination CEO last month. At the time Brungardt forecast that the shadow inventory of homes could take two to three years to clear to a point where housing supply and demand begin to match up again, and that no acknowledged housing bottom will appear until that shadow inventory is significantly curtailed.

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In other words, he doesn’t expect the U.S. housing market to recover until 2013, at least.

Brungardt said Thursday that there are pockets, especially on the West Coast, where home prices overcorrected in the last few years; we’re starting to see home price appreciation in those areas now, with purchase money "starting to come off the sidelines," he said.

But overall his viewpoint of a slow, sluggish recovery stood pat. The supply-demand ratio remains severely mismatched, he said, and that will continue to drive home prices lower save for specific geographical pockets where prices have begin to creep back up.

Even so, depending on where in the U.S. a potential buyer is, he said it would make sense to be thinking about buying a home, taking advantage of discounted prices and historically low interest rates.

Lawrence Yun, chief economist at the National Association of Realtors, said that "modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions," commenting on Thursday’s better-than-expected pending home sales data. "Mortgage rates should rise only modestly in the months ahead, so we’ll continue to see a favorable environment for buyers with good credit."

Mortgage application volume dropped 12.9% last week as the average rate on a 30-year fixed mortgage edged higher to 4.8%, from 4.77% in the prior week.

Until the shadow inventory of available homes for sale clears out, homebuilders and homeowners can expect material dampening of home purchases, Brungardt told TheStreet last month and reiterated Thursday morning.

The homebuilder sector is well off its late-spring peak, when buyers were rushing to take advantage of federal tax credits for homebuyers, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag.

The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the homebuilder sector, remains more than 60% off its peak of $46.08 in early 2006. The iShares Dow Jones US Home Construction (ITB) ETF remains more than 72% off its peak of $50.10 in the spring of 2006.

This article has been republished from The Street. You can also view this article at The Street, a site covering financial news, commentary, analysis, ratings, business and investment content.


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