If you are a buyer, the current housing market continues to afford good opportunities, whether as a principal residence or as an investment property. If you are looking for beachfront housing in Florida, there may not be a better time to buy than now. Then again, the housing market remains in a flux driven by high unemployment and record foreclosures.
It’s true that the housing market is much improved from a year ago, but there continue to be problems. The S&P/Case-Shiller Home Price Index of 20 major metropolitan areas in the United States continues to show declines.
The NAHB Housing Market Index, an indication of the sentiment of builders, was a muted 16 in February. To tell you how bad this is, any reading below 50 suggest negative sentiment amongst builders. It has not been since April 2006 that the NAHB index has been above 50.
I remain somewhat bearish on the housing market in 2011 and into 2012. If you are a buyer, great; but, sellers may continue to face lower prices.
The key Housing Starts for January were stronger than expected for the second straight month, coming in at an annualized 596,000, well above the estimate of 540,000. Yet homebuilders continue to be apprehensive, as the key Building Permits for January fell 10.4% sequentially and were short of estimates at an annualized 562,000, short of the estimate of 575,000.
What the housing data point to is an improving yet still sluggish housing sector.
Add in the record foreclosures and weak home prices and there are still reasons to be concerned.
The housing market is improving and is better than where it stood a year ago, but I feel there will continue to be barriers as we move ahead.
Consider that a key driver of the housing market is jobs. We need jobs and security in order to give buyers confidence to assume a mortgage and not worry about losing their jobs and missing payments. And, until we see this, I really question how confident homebuyers will be.
When people struggle financially, one of the first things to go is the home, along with cars. At this time, there are estimated to be about five million homeowners behind on at least two payments, according to data from foreclosure tracker RealtyTrac Inc. What is more worrying is that an estimated 1.2 million homes will be foreclosed this year, above the one million in 2010.
Besides the loss of jobs, homeowners are also just walking away from their homes in many cases when the value of the home is below the outstanding mortgage.
The reality is that no one wants negative home equity and, sometimes, instead of waiting for home prices to rally, it may be just as easy to walk away, and this has been what’s happening.
And, if housing continues to struggle, it will likely impact the economic renewal.