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Is the Housing Market Recovering?

By Diane & Bob Arenholz

Real Estate Agent with William RAVEIS Realty

August 08, 2009 08:16 AM

Bob and I work for Better Homes and Farden Rand realty and we are very happy to be working with the Rand family, all who have great insight into the real estate industry. Recently Joe Published a blog regarding the housing market that I thought I would pass along to my Activerain friends:

Published by Joseph Rand on Tuesday August 4, 2009 8:51 PM

We are starting to see some positive signs in the housing market, both locally and nationally. I don't know if this means that we're seeing a recovery, but it might mean that we've now tested the bottom of the market. At the very least, things are not getting any worse, and it's been a while since we've been able to say that. Here's a review of some recent housing news that should give us some reason to be cautiously optimistic:

The Wall Street Journal reported that the Case-Shiller Index showed that home prices went up in for the three month period ending in May 2009 by 0.5%, the first monthly gain in three years.

The National Association of Realtors reported that pending home sales (deals being put into contract) went up for the fifth consecutive month in June, the first time in six years that pending sales have gone up five months in a row. This squares with what we've seen internally in our open numbers -- our new business in the past few months has been comparable to last year, and up significantly from the winter. Now, some of that is seasonality (the market heats up in the spring), but it's good news that people are starting to come back into the market.

Nationally, Bloomberg reported that U.S. home prices had the "smallest annual drop in 10 months," indicating that the drop in prices might be stabilizing.

With regard to new construction, CNN reported a "surge" in new home starts, single-family home starts, and application permits.

With regard to inventory, Reuters reported that the number of unsold homes on the market was down 2.1% in June 2009. That's generally good for the market, because unsold inventory tends to gum up the market and exert downward pressure on pricing.

With regard to whether people should rent or buy, the Journal News reported that the "scales are tipping"toward ownership over renting, with the cost of buying a home versus renting a home narrowing. The News quoted the AP as reporting that "the gap between the monthly mortgage payment on a median-priced home and the median rent has shrunk from $777 a month to just $221 in the past three years."

In our local markets, the data was mixed -- transactions and prices were still down significantly from last year, but units were way up from the winter, and prices had generally stabilized at their current levels in the spring. For a full report on the housing market in the Hudson Valley, check out our Quarterly Market Report.

In many of the other local markets, recent market data indicates that the real estate market might be stabilizing. This includes New Jersey, where June home sales were up 12% from last year.

Finally, even Bob Shiller, the creator of the Case-Shiller Index that has been one of the most dour of the bears about the real estate market, sees reason for optimism that we may have found the bottom.

As the AP noted this week, it's time to take a deep breath and recognize that the worst is probably over. That said, we're not out of the woods. Unemployment is high and likely to stay high, which will sap the strength of any recovery. And if interest rates come up this winter or spring, that would likely diminish the buying power of purchasers and exert downward pressure on prices. Moreover, the high-end of the market is still very, very slow. But on the whole, there is reason for optimism that the worst is behind us.