Housing Market Trends

Housing Market Trends

The REALTORS® Confidence Index Report and Market Outlook for July is out. The report gives a great overview of housing market trends. (via Mr. T in DC)

REALTORS® Confidence Index

The REALTORS® Confidence Index is a key indicator of housing market strength based on a monthly survey of over 50,000 real estate practitioners. Practitioners are asked about their expectations for home sales, prices and market conditions. Below, I have highlighted a few points that I found interesting.

Problems Facing The Housing Market

In addition to showing that  confidence dropped in July, the report also mentions a couple of the major economic factors affecting the housing market:

  • High shadow inventory
  • Housing starts are projected to rise 25% in 2012, followed by a 50% jump in 2013 (Does the market really need more inventory?)
  • Potential effects from the “fiscal cliff” to the economy
  • A major issue right now is mortgage availability and appraisals.

 

Very, Very Slowly Improving

One glimmer of hope in the report is that the time it takes to sell a home is slowly declining. Homes that have been on the market for 6 months or longer, fell to 21% – down from 30% a year ago.

The Big Problem

To me, the major issue is not too many homes on the market, but the ability to get a mortgage. The report shows that 34% of sales involved a down payment of 20% or more. I think banks are doing things backwards. Down payments should be used in a similar fashion as how the Fed uses interest rates to guide the economy – if housing prices go up too quickly, then raise the down payment requirement.

Requiring a 20% down payment while the economy is struggling is not helping anything. To fix the system, perhaps we need to stop using a credit-risk based approach and instead have a program where a government entity (like the Fed) controls lending requirements. In return, banks who participate get cheaper than market rate money (yes, I know I am dreaming).

 

REALTORS® Confidence Index Full Report

For those who are interested, here is the full report:

REALTORS® Confidence Index July

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