Housing recovery will surge short term, but hurdles remain
With existing home sales and property construction picking up over the past three years, all the positive momentum in housing is expected to continue, but headwinds still loom.
Consistently low interest rates and falling home prices will continue to spur demand for properties among investors, RealtyTrac vice president Daren Blomquist told HousingWire.
"I think that the momentum will continue and we will see positive news on the housing front going forward," he added.
The housing market will post various sector results this week including existing home sales, the Federal Housing Finance Agency house price index and new homes sales. All results are expected to show continued positive trends.
Existing home sales surged 5.9% in November to a 5.04 million annual rate, following a 1.5% rate in October. Also, the FHFA purchase only house price index gained 0.5% in October after remaining virtually unchanged in September.
New home sales also showed strength in November with sales up 4.4% to an annual rate of 377,000, hitting a two-year high. New homes sales, which started in 2012 at 340,000, have slowly been building up.
However, headwinds do remain for the industry including a backlog of delayed foreclosures, high delinquency levels and an elevated shadow inventory.
"Recent housing and economic indicators have been mixed. Both new home and existing home sales rose, net demand remained at high levels, housing starts jumped, and builders' confidence rose to the highest level since mid 2006. But the December payroll data offered little excitement, and mortgage applications point to potential weakness in future sales," Chase analysts said.
Blomquist and his colleagues recently noted in RealtyTrac’s Year-End 2012 Foreclosure Market Report that last year was known as "the year of judicial foreclosures." As a result, an increase in foreclosure activity is expected to roll well into 2013.
Foreclosure activity increased in 25 states, while median home prices also rose in 25 states, lifting 1.6 million homeowners out of negative equity in 2012.
A total of 25 states posted year-over-year increases in foreclosure starts — 20 of which use the longer judicial foreclosure process.
In particular, states dealing with foreclosure backlog are more susceptible to continued processing delays, including Illinois, New Jersey, New York and Ohio. These delays weigh on long-term housing gains.
"And all of that’s to say that those states are going to have a longer path to recovery than the states that bottomed out more quickly," Blomquist said.