Demand, Prices Up as Housing Market Toys with Turnaround

It might seem foolish to speculate that the housing market is in a sustained turnaround, given the dashed hopes and occasional bright spots that have vanished over the past several months.
But recent headlines and data updates are coming awful close to declaring a bottom and the beginning of a hard recovery.
Home prices have managed small but consecutive increases in many regions, and sales of both new and existing homes have shown surprising surges.
Even South Florida, a foreclosure epicenter of the housing bubble, is seeing bidding wars on properties as buyers are outnumbering sellers to a point of creating inventory shortages, a trend that has emerged in other U.S. housing markets.
The New York Times last week ran a story with the headline: “After Years of False Hopes, Signs of a Turn in Housing.”
The Times declared that after six years of the deepest housing market slide since the great depression, “a growing number of experts and people who actually put money into housing believe the end has come.”
The Miami Herald concluded that with mortgage rates holding indefinitely at record lows, South Florida is poised to recover from a market collapse that saw home values slashed by more than 50 percent since 2007.
“We’re not going to sell as many homes in 2012 as we did in 2011 because we don’t have enough inventory to meet the demand,” Ron Shuffield, president of EWM, told the Herald, adding that the tight inventory is a classic scenario for prices to rise.
June saw a spurt of positive reports, fueling the market optimism.
CoreLogic reported today that May marked the third consecutive monthly increase in home prices nationwide on both a year-over-year and month-over-month basis.
Sales of newly built, single-family homes jumped 7.6 percent to a seasonally-adjusted annual rate of 369,000 units in May, the most since April 2010 and surpassing most estimates, according to the Commerce Department.
Investors are fueling the demand for distressed properties, many of them in some phase of foreclosure, especially as rental properties are becoming more of a lucrative option.
Pending home sales in May hit the highest level in the past two years, and are 13 percent above year-ago levels, according to the National Association of Realtors (NAR).
Low inventories are partly a result of “underwater” homeowners who are unwilling to list their homes, which would require a lengthy short sale process, or additional cash to complete the transaction.
“If credit conditions returned to normal and if we had more inventory, especially in the lower price ranges, more people would become successful buyers,” said Lawrence Yun, NAR chief economist.  “In an environment of historically favorable housing affordability conditions, it’s frustrating to see some consumers thwarted in the process.”

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