In the second quarter (Q2) of 2011, 31 percent of all home sales in the country were a foreclosure sale[1]. And that number would be much larger, say analysts, if it were not for foreclosure delays stemming from the robo-signing fiasco last fall. While this number is significant, some analysts believe that it is not actually the most important figure to be gleaned from Q2 numbers. They point out that the pool of non-distressed properties for sale today is shrinking, and it does not show signs of stopping any time soon[2]. As CNBC analyst Diana Olick explains, “the non-distressed market is withering away” because sellers are afraid to put their homes on the market…[and] losing equity.” She also points out that this is creating fewer “move-up buyers” and that “first-time buyers are choosing to rent in droves” thanks to unemployment and a slow economic recovery.
What does this mean for the housing market recovery? It means that there could be a long-term trend of decreasing demand for housing. And that could slow the recovery and the absorption rate of the market even more.
Do you think that the demand for housing will ever reach former highs?
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[1] http://www.cnbc.com/id/44267326/
[2] http://www.cnbc.com/id/44274402
As an agent active in the day-to-day market, I’m seeing more short sales come onto the market, while bank-owned homes are way down as far as inventory. This would jive with your comments regarding banks slowing down the foreclosure sales. We’ve seen a increase in demand for rental property as well, with former home owners chasing affordable rental homes and condos. What is the solution to this dilemma? So far the actions by the Federal Government, along with the Fed Reserve have not spurred the return of many buyers, despite low interest rates and low prices. I think it all comes down to the fact that the unemployment picture, looking into the near term at least, looks bleak. Without a stable income from what jobs can bring, most potential buyers will rent vs. buy.
I think the market will cycle back but it will do so much faster if we have America get back to work. Americans need to be in better paying jobs for the move up market and first time homebuyers.
America getting back to work would require the people who fall for the trickle down economics theory to get a clue. Publicly held companies do not hire employees they do not need just because they paid less in taxes and have extra profits. They hire employees to keep up with production needs and projected production needs. What works is Trickle up economics because when the poor and middles class have more money to spend they spend it which causes production to go up and companies to hire. The best way to get a cycle like this started is by the government to hire huge numbers of people to rebuild the infrastructure and as they spend money production goes up and the private sector starts hiring to keep up with that increased need. The worst thing that a government can do during a recession is to lower taxes for Large companies and the wealthy. They need that money to prime the pump.
As a Realtor, I specialize in Landlord/Tenant issues and relationships. Bruce is correct, with unemployment being what it is and job security is almost non-existent, and my working in a dying county (no real paying jobs), it matters not what the interest rate is. People simply can’t afford the 3.5% down and even if they can, they’re choosing not to be on the hook for 30yrs. I’ve said it before and I’ll say it again: What good is a great rate, when in two years you lose your job? So you see, the answer is “no”, I’m convinced housing demand won’t return, ever; at least not for first timers. The Multi family housing commercial deals are chugging away, so that’s good for investors, but sfh demand? No way. Even if the unemployment numbers improve magically, uh, that doesn’t mean those now employed will have a job in two years. Why would it? CEOs even of small businesses, have realized, a task to be completed can be executed with 1/4 the staff. albeit an overworked staff and that savings goes into their bank account.