The U.S. housing market is still in poor condition; don’t for a second believe a recovery is going on in the housing market. For the U.S. economy’s housing market to improve, there have to be reasons. Yes, there has been good housing market data flow from some parts, but overall the U.S. economy’s housing market is still beaten to the ground.
Would you call it a robust recovery if the price of a stock goes down 75% one day and then next day increases five percent? This is exactly what’s happening in the housing market in the U.S. economy—home prices may have increased a little, but the overall market is still in trouble.
In order for there to be a healthy improvement for the U.S. housing market, we need to see an increase in mortgage lending (or more people being willing to borrow to buy homes), an increase in first-time homebuyers, an improvement in existing home sales, a decrease in distressed home sales, and people paying for their mortgages on time. These factors are missing in the current so-called “housing recovery.”
According to Mortgage Bankers Association (MBA) the total number of mortgage applications filed in the U.S. fell 12% for the week ending October 19 compared to the week earlier. (Source: Mortgage Bankers Association, October 24, 2012.) The appetite for borrowing is just not there.
In September, according to Freddie Mac, the 30-year fixed mortgage rate in the U.S. fell to the record low of 3.47%, compared to 3.60% in August. (Source: National Association of Realtors.) But the growth in buyers for homes has not been from homeowners; it has come from investors. To have a healthy housing market, the people who actually buy the homes need to live in them. However, record-low interest rates are not luring would-be homeowners back into the housing market.
Look at these facts:
At the end of second quarter, the percentage of people delinquent on their mortgage payments was still 7.58% of all outstanding loans—an increase of 0.18% from the first quarter.
The combined percentage of loans in foreclosure and mortgage payments past due at least a month was 11.62% in the second quarter! Millions of Americans are still living in homes with negative equity.
Existing home sales dropped 1.7% in September compared to August and distressed homes sales still accounted for 24% of all sales!
In September, first-time home buyers only accounted for 32% of sales in the housing market—similar to September 2011!
With all this, it can’t be clearer that the U.S. housing market is still on the edge. A housing market recovery is crucial to an economic recovery for America, but it has to be a real recovery; not investors buying houses to rent them out to tenants.