Good News for the Housing Marketby
The housing market’s been giving mixed signals, flashes of hope mixed with sudden bad news. There’s no sign yet that a real recovery has taken hold, but some new data are optimistic.
Home prices and sales are on the rise. DataQuick says the average sale price for the past 30 days was $189,500, up $7,000 from a month earlier. Sales are also up 8.2 percent during this time. In Southern California, for example, DataQuick says the market is continuing its “step-by-tiny-step trek back toward normalcy.”
Shadow inventory is shrinking quickly. The so-called shadow inventory refers to distressed properties that aren’t listed for sale but probably will be—homes on which borrowers are grossly delinquent or already in foreclosure, or that banks have already repossessed. CoreLogic says in April, 1.5 million homes were in the shadows, which equates to a four-month supply, down from a six-month supply a year earlier. A smaller shadow inventory can be positive for prices because it means there are fewer distressed homes poised to come on the market.
Foreclosures are up. In the fall of 2010, the robo-signing scandal erupted over how banks were using faulty paperwork to evict borrowers. They cut back on processing foreclosures, building up a backlog of distressed properties. In March, banks agreed to a $25 billion robo-signing settlement, and new data show banks are restarting the foreclosure machinery. In May, banks filed to foreclose on 205,990 properties—a 9 percent increase during April, according to RealtyTrac. The foreclosure pickup hurts the people who are losing their homes but helps the housing market in the long run because it lets banks get through the backlog and eventually move on.
Borrowers are building more equity in their homes. Our colleagues at Bloomberg News report that homeowners have made the biggest jump in home equity in more than 60 years. Half of borrowers who are refinancing are paying down some of their debt and reducing their loans. They’re also refinancing into shorter-term loans that have higher monthly payments but let them pay down principal quicker. Overall, mortgage debt is down 7 percent since 2007—a small consolation for the decline in home values, which are down 23 percent over the same period.
Finally, if you’re looking for more data and a big-picture view, check out Harvard’s annual State of the Nation’s Housing report that’s out today. It also sees signs of recovery in the market and says unless something comes along to dent the broad economy, the housing picture should become even brighter.