Housing Market Recovery Predicted for 2010

Fortunately, that year begins in 2 and a half months, and, according to speakers at the recent McGraw-Hill Construction Outlook Executive Conference in Washington, DC, new housing starts during the next year are predicted to reach 560,000 units. That is an increase of 11% over the numbers built in 2009. It will inject $466 billion into the economy, which is very good news after the 25% drop in housing starts during this year. In addition, multifamily housing starts are expected to climb by 14% next year.

Meanwhile, as we approach 2010, 33 metro areas have shown new home construction momentum: building permits nation-wide were up 4% between April and May to an annual rate of almost 520,000 units. Bloomberg News indicates that during the last 7 recessions, new home construction increases preceded the general economic recovery by around 6-7 months. In addition, residential real estate sales have traditionally begun their increases about 4 months ahead of the general recovery.

However, this time around, despite the housing market’s momentum, there is a problem standing its way. That problem is the housing market itself. The mortgage Bankers Association tells us that there are more than a million foreclosures sitting in inventory; and Lawrence Yun, of the National Association of Realtors, suggests that banks could repossess an additional 2.5million homes this year.

Currently the number of foreclosures in the nation stands at almost 1.4% of all loans, while just over 9.1% are at least 30 or more days past due. In addition, 20 million of the 93 million homes in the nation are currently worth less than the money owed against them. Finally, between 2005 and today, average homeowner equity has been slashed by more than 50%, on average. This slap in the face to consumer confidence, coupled with a current 10% unemployment rate, continues to limit people’s ability to purchase a new home.

Paradoxically, the demand for new homes has continued to climb, albeit on the lower end of the market. This is very much due to the President’s economic stimulus package, and the fact that mortgage rates continue to hover around 5%. Unfortunately, almost half of all banks, according to a Federal Reserve report, have made it more difficult for potential home buyers to obtain mortgages.

Despite these hurdles, the Mortgage Bankers Association remains upbeat in its predictions. Since mortgage rates not expected to rise significantly, sales of new and existing homes should recover during 2010. High priced homes will still continue to languish, and their values will continue to diminish. New home construction will continue its slow increase, but it will not pick up speed until the glut of foreclosures, (which are far less expensive than new homes) are removed from its path.

Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.JablonRealEstate.com
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