Chief economists for the National Association of Realtors, Zillow (Z) and the National Association of Home Builders shared optimistic outlooks on the housing market on Friday and predicted a quicker-than-expected recovery.
Lawrence Yun, chief economist at the National Association of Realtors, said that by this time next year, he expect to see either a 10% jump in house prices, or for new home starts to jump by 70 to 80%.
Speaking at the spring conference for the National Association of Real Estate Editors Yun said small homebuilders that may build 10 houses a year “in the aggregate make up 70% of market, but are now shut out because they can’t get funding from the bank.”
He said that if credit opens to these smaller builders, he would “not be surprised” to see such a jump in housing starts.
David Crowe, chief economist at NAHB, disagreed with Yun, saying he was “hesitant to say the industry can respond that quickly.”
Crowe, however, said the recovery was steadily occurring and best seen at a local level. “The recovery we are seeing is mild and meek and doesn’t show up well on national numbers,” he said.
Stan Humphries, chief economist at Zillow, agreed with Crowe, and showing a map of rapidly improving cities such as Detroit, Phoenix and Miami, Humphries said the spread of appreciating prices was “almost like a bacteria attacking a bad virus.”
“Talking about home values nationally or on a metro level tends to obscure what is happening on a very local level,” said Stan Humphries, chief economist at Zillow. “At the zip code level you can really see the emerging green shoots of a recovery.”
Humphries had previously widely predicted an “L-shaped recovery,” in which the market would remain flat and then shoot up, but now he said the recovery may look “more like a staircase” with price spikes followed by plateaus and more price spikes.
Yun also predicted a more steady, rapid recovery beginning this year.
Typically after the market bottoms out, a rapid recovery is expected, said Yun. This time, that did not occur. Following what Yun called a “multiyear bottom,” the housing market stayed stagnant until this year.
“Things are starting to brighten in 2012,” he said. “The increase in demand is occurring despite the dysfunctional nature of the market.”
That dysfunction has been largely caused by buyer hesitancy, dropping prices and tight credit. Yun said the all cash transactions, which make up about 20 percent of home prices, are hiding many of these problems.
He also said inventories were falling to “50-year lows,” which will start to push prices back up, and that while the foreclosure inventory may still be high, it is much better than in past years. Both areas, Yun said, are “healing and trending down.”
He also said that the potential for shadow inventory to be released onto the market has “thinned out.”
“The number of potential shadow inventory one can use is the number of seriously delinquent mortgages,” he said, and that number is “trending down.”
“The distressed sale impact to the housing market is slowly diminishing, which is why you are beginning to see higher median prices,” said Yun.