Despite Growth, Housing Remains Far From Recovery

Various metrics continue to signal a housing recovery is well underway, but too much praise is still premature as the market remains far from stabilization, according to the Obama Administration’s July 2014 Housing Scorecard.

Though improvements in home sales, rising property values and declining foreclosure activity are indicative of a rebounding housing market, certain caveats remain.

“Indications are that continued improvements in the economy, such as the July employment report which marked the sixth straight months that more than 200,000 jobs have been added, along with slowly easing mortgage credit, will keep the U.S. housing market on the path to recovery,” stated Katherine O’Reagan, HUD assistant secretary for policy development and research.

After two previous lackluster quarters, sales of previously owned homes rose for the third consecutive month in June, up 2.6% from May, according to Scorecard data derived from the National Association of Realtors. Despite the monthly gain, sales remain 2.3% below the 5.16 million pace achieved a year earlier.

New home sales, on the other hand, fell in June and sales in May were revised sharply downward. 

Sales declined 8.1% in June to a seasonally adjusted annual rate of 406,000, following sales of 442,000 in May that were 12.3% lower than estimated last month, according to the Scorecard, which is released in conjunction with the Department of Housing and Urban Development (HUD). Additionally, June sales were at their lowest level since March and down 11.5% from one year ago.

“The weakness in sales reflects strict bank lending standards, less favorable housing affordability, and low inventory,” writes the Scorecard, sourcing data from HUD and the U.S. Census Bureau.

In a boon to the overall housing market, foreclosure starts and completions continued their downward trend in June.

During the month, lenders started the public foreclosure process on 47,243 properties in the county, down 4% from the previous month and down 18% from one year ago to the lowest level since November 2005. 

In terms of foreclosure completions, lender activity decreased 5% in June when compared to May—a 24% decline from June 2013 and also the lowest level since June 2007.

Of note, however, is that despite the decreasing activity, foreclosure starts and completions were up from a year ago in about 15 states.

“Encouraging news notwithstanding, there is a need to continue with recovery efforts as home sales have slowed, too many homeowners remain underwater, and mortgage delinquencies rates remain elevated,” states the Scorecard.”

In the spotlight for marked signs of housing improvement is the regional market of Philadelphia-Camden-Wilmington, a metropolitan statistical area (MSA) that encompasses 11 counties across Pennsylvania, New Jersey, Delaware and Maryland.

The local economy in the MSA—the sixth largest in the nation—has been growing slowly since its decline in 2008, as job growth in the area nears its pre-recession pace, home sales improve and foreclosure risk declines.

From the first quarter of 2004 through the first quarter of 2008, jobs in the MSA increased at an average annual rate of 0.8%, prior to the impact of the Great Recession, which saw jobs decline at an average annual rate of 2.4% from the second quarter of 2008 through the first quarter of 2010.

Additionally, the unemployment rate for the Philadelphia MSA peaked at 9% in April 2010 and has since fallen to 6.1% as of June 2014, the Scorecard notes. When compared to national statistics, unemployment peaked in October 2009 at 10%, also falling to 6.1% as of June. 

Exiting home sales have also begun to rise closer to their pre-recession levels in the area, increasing at an annual rate of 14% to reach sales of 44,000 units during 2013—after seeing sales drop 15% during the grips of the downturn from 2006-2008, then again at a slower pace of 8% from 2009-2011. By comparison, existing home sales in the nation increased at an annual rate of almost 5% from 2009-2013.

New home sales over the last two years have stabilized in the MSA at approximately 2,275 units, an increase of 16%, albeit at a low base, notes the Scorecard. Nationally, sales have increased at an annual rate of 20% from their 2006-2011 trough, during which sales declined 13%.

When compared to the nation as a whole, the MSA also outperformed in mortgage foreclosure risk.

Over the last year, mortgages at risk of foreclosure in the Philadelphia area decreased by 25%—from 54,000 to 40,700—compared with a national decline of 17% over that same period. 

As of the first quarter of 2014, the average time to complete a foreclosure was 633 days in Philadelphia and 1,103 in New Jersey, both significantly higher than the national average of 572 days, according to the Scorecard data.

While the MSA case study provides just a slice of the broader recovery taking place nationwide, it is clear that more needs to be done on a larger scale. 

“Given the current state of the market and recognizing that recovery will take place over time, the Administration remains committed to its efforts to prevent avoidable foreclosures and stabilize the housing market,” states the Obama Administration in the July Scorecard.

View the July 2014 Edition Housing Scorecard.

Written by Jason Oliva

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