What a bumpy ride we’ve had over the past five years. But we seem to be building some upward momentum. Markets change over time, and it’s good to see more than a year’s worth of progress in many key areas of the industry.
I’ve hesitated over the past couple of years to be anything but cautiously optimistic about my outlook for housing. Now I’ve upgraded to being solidly optimistic. Although not all markets are healing at the same rate, I believe the worst is over and there’s much to look forward to as we approach the new year.
This month, though, let’s reflect on what’s been accomplished and where we are now.
Prices and Sales
Sustained growth in prices and sales are the strongest indicators that housing is well on the road to recovery. The summer selling season ended strong with sales up 8.5 percent and prices up 6.3 percent in August, according to the RE/MAX National Housing Report. The data marked 14 straight months of year-over-year sales growth, and seven consecutive months of growth in prices.
Another strong measure of progress: Rising home values lifted 1.3 million homeowners from underwater status to positive equity in the first half of 2012, the government reported.
Shrinking inventory has pushed up home prices and reduced days on market significantly. But many of you are severely road-blocked as you scour the market for properties for eager first-time buyers and confident investors. The RE/MAX report showed the average month’s supply in August was 4.9—down from 6.8 a year ago. With a six- to seven-month inventory considered the hallmark of a balanced market, it’s obvious that home prices are still too low to appeal to many sellers who suffered large equity losses.
Completed foreclosures were down 24 percent in August from a year ago, and CoreLogic reported the shadow inventory at its lowest point in more than three years. Meanwhile, short sales reached a three-year high in the first quarter, surpassing foreclosures.
Builders are back at it. At summer’s end, new-home sales were nearly 28 percent ahead of last year’s pace, the U.S. Census Bureau reported. New-home prices were at a five-year high. Both are good signs and show a portion of the market that, while bridled by a sluggish economy, has less red tape to encumber it.
Unemployment fell below 8 percent this fall for the first time since January 2009. This news was tempered by the soft jobs growth, putting us on pace for 1.4 million net new jobs for the year. Yet the projection for 2.2 million new jobs in 2013 keeps the job-meter needle leaning in the right direction.
To be sure, some caution signs remain on the road to recovery, in addition to the weak resiliency of the economy. Forthcoming policies, such as the qualified mortgage (QM) rule, could restrict financing even more than the current tight underwriting practices that shut down 10 to 15 percent of all housing contracts. We need to support NAR in lobbying for a reasonable approach that will provide safe and affordable loans to responsible buyers without stranding many of them.
Yes, the worst of the housing downturn is over, but let’s not take anything for granted. Instead, position yourself to fully participate in the housing recovery.
Be thankful. Be diligent. And don’t slow down.
Margaret Kelly (CRB) is chief executive officer of RE/MAX, LLC.
For more information, visit www.remax.com.