U.S. Real Estate Market Prospects in 2012
The U.S. real estate market has taken a bad thrashing the last four years. Long gone are the days when it floated high in the sky in mid-2007 with property valuations approaching averages of a half million dollars (http://www.reuters.com/article/2012/05/14/us-usa-campaign-housing-idUSBRE84D17P20120514). Worse yet, home prices continued to drop again in the first quarter of 2012, signaling to remaining homeowners the doldrums still hadn’t finished.
Statistics Don’t Tell a Story
Statistically, the U.S. market has less slightly over ten percent of existing homes vacant in 2012. Of the 132.8 million units standing, 78.8 million are owned of that figure 52.8 million are leveraged to a lender via mortgage. Of those financed, 12 million are underwater and 2.5 million are at risk of default being behind payments by over 90 days (source – John Burns real estate consulting – http://www.calculatedriskblog.com/2012/05/graph-us-housing-market-summary.html). However, these statistics don’t really equivocate the story that continues to depress the U.S. market. As long as buyers can’t get ahead far enough with income to pay for a purchase and as long as banks continue to lock people out, the U.S. market will continue to remain tepid through 2012.
Desperate for News
That said, the U.S. media is desperate for signs of a turnaround, having been lost in the wilderness for four years. Not surprisingly, when quarterly reports showed a low teens increase in change of sales, building starts, and building projections in April 2012 the bullhorns started spreading the news to the land (http://www.bloomberg.com/news/2012-05-16/beginning-home-construction-in-u-s-exceeded-forecasts-in-april.html). Proponents of the near future are looking for a recovery to occur in two forms: a boost in rental demand and then a traditional boost in actual home selling. According to recent reports, the traditional boost may have hit first.
Missing Inventory Risk
If a recovery has indeed occurred, the problem still remains with the existing home inventory available. Further, banks have thousands of units on their portfolios that haven’t even been listed. In an attempt to avoid further losses, many foreclosed homes have been kept off the availability systems to avoid further depression of market prices due to the foreclosure glut. Had this inventory been marketed as soon as it came available, home prices would have dropped much farther, particularly in heavy hit areas such as Nevada, Florida, and California. The problem still remains in mid-2012. The market still hasn’t seen this still-warehoused supply.
The U.S. real estate market is possibly stabilized finally, but whether it will begin to grow again remains to be seen. Folks thought the U.S. stock market had turned around too, but it just dropped 700 points in the first weeks of May 2012. So more quarterly reports on a consistent growth trend are needed. U.S. homebuyers and lenders big and small are burned. No one wants to get hurt again anytime soon.