The housing market is not in the midst of another bubble with inventory levels expected to rise in the near future, suggested Rick Sharga, executive vice president with Carrington Mortgage Holdings.
Sharga made those assertions while speaking at the REOMAC 2013 Summit & Expo in Dallas on Monday as keynote speaker.
Sharga began by warning the crowd that things could get worse before they get better.
However, with pending sales, existing home sales, new home sales and housing starts up, while delinquent sales continue dropping, the recovery seems very real, he said. But Sharga reminded the crowd "this is not a 2005 market."
Regarding existing home sales, Sharga added that "we're now at the highest point we’ve been at since 2006, but we’re not yet at 2006 numbers."
The lack of existing home inventory is one of the reasons we’re seeing prices going up, Sharga said. "New home inventory is at the lowest point it’s been in over 30 years," he said. Fortunately, with housing and foreclosure starts on the rise, within a year, he anticipates more properties on the market.
In fact, added Sharga, this time next year, it is possible we may be seeing too much inventory.
As for now, Sharga informed the crowd that new home sales are not increasing at the pace they have after previous recessions. "We actually went down again in new home sales after the recession this time before we finally went back up," said Sharga, who added that even though the numbers are trending up, we’re still miles and miles away from healthy.
As home prices continue to seemingly skyrocket compared to previous years, Sharga said the fear of another housing bubble seems to be looming.
According to recent Case-Shiller data, home prices are up 8.1% year-over-year from January 2012-3012, while the CoreLogic HPI reported a 6% annual increase in home prices. "A lot of what’s driving home price increases is lack of available inventory," reminded Sharga. However, he noted, "Very few markets are anywhere near where we were at the peak."
But Sharga feels confident "we are not creating a bubble." The real estate expert showed the crowd a chart provided by Trulia that revealed the average price increase is 3.6% per year, putting the housing market almost exactly where it should be if there was no burst.
Sharga noted that states seeing the strongest "bubble-like tendencies" were those that faced the largest declines during the crisis. He also mentioned LPS' prediction that home prices could potentially rise 35% without affecting affordability.
So with factors that continue to be improving, what could potentially create a problem? With the unemployment rate flirting with the "healthy economy" line, Sharga noted that the housing industry is one economic misstep away from a disaster.
Sharga wrapped up the outlook session by predicting slow, but steady growth. Sales volumes are anticipated to hit between 4.9 million to 5.1 million units in 2013, while price appreciation may reach 3% to 4% growth this year.
Foreclosure activity will continue to decline, noted Sharga, although we may see another two or more years of higher than average rates.