| Courtesy of Hanley Wood- Written by Jonathan Dienhart and Ken Lee | |
| 05.27.2011 | |
 Housing remains stuck in the doldrums even with extremely low mortgage rates and despite some improvement in private payroll employment. Part of the reason for this disconnect is the slew of foreclosures and bank-owned properties which are still flooding the housing market. Defaults are expected to reach new record-highs this year which have buyers holding out for better deals and traditional home-sellers battling low-ball offers from banks. The aggressive pricing on distressed properties is undercutting individual home sellers and new home builders alike, and wreaking havoc on local housing markets. According to data from Housing IntelligencePro, both new home activity and regular resale activity made up a smaller portion of total closing activity compared to the first three months of last year (and every quarter since).
Nationally, bank-owned real estate closings accounted for almost 32% of all settlements in the first quarter, a figure which has been steadily increasing over the last year. Regular resales still made up the biggest chunk of settlement activity, about 60%, while the languishing new home market accounted for the remaining 8.5% or so of closing activity in the first quarter. That means REO sales volume was more than three times higher than new home closings. New home share has been cut in half since peak times, whereas regular resale share has decline by about one-fourth. The continued rise in REO sales is not likely to abate any time soon, foreclosure rates are still elevated and according to some estimates, may increase this year. Housing data has been choppy thus far in 2011; a month up and then a month down with no real conviction either direction. A notable lack of improvement seems to be the overriding theme. New home sales have now increased incrementally for two straight months, albeit from all-time record lows that were set in February. Existing home sales and housing starts both declined in April after increasing in March. The next few months don’t look encouraging, with Pending Home Sales down substantially in today’s data release from NAR. The private sector job market has been improving slightly and mortgage rates are near all-time lows but consumer confidence, especially when it comes to housing, is still weak. In broader economic news, weaker economic data and re-emerging concerns of the Eurozone debt situation has hampered equities so far in May. First-time jobless claims remained above the key 400,000 level for the entire month which suggests labor market conditions may soften once again. Revised GDP figures this morning showed the economy growing at a lackluster 1.8% for the first quarter based on weak consumer spending. |
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