Has the Housing Market Finally Reached Bottom?

Has the Housing Market Finally Reached Bottom?

If home buyers or home owners are waiting for the housing market to hit bottom before acting, they may have already missed it.

“The crash is over,” Mark Zandi, chief economist for Moody’s Analytics Inc., told Bloomberg about the real estate market. “Home sales—both new and existing—and housing starts are now off the bottom.”

Several economists are saying the bottom of the housing market has already been reached, and the market has been showing several signs of progress, including home prices stabilizing and demand increasing. The economists say they’re optimistic about a recovery in the housing market, despite threats of a foreclosure wave coming.

One of the biggest signs that a sustainable housing market recovery is taking shape: Consumer confidence is up.

“Today’s consumer confidence shows labor markets recovering and that confidence is going to allow consumers to go out and buy homes,” Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi in New York, told Bloomberg.

Indeed, real estate professionals have been reporting increased activity among home shoppers this spring, too.

“This year’s selling season is shaping up to be the strongest we’ve seen in years,” says Margaret Kelly, RE/MAX’s chief executive officer. “Although we don’t expect home prices to rise in every market at the same rate, the worst is definitely behind us, and a slow, steady recovery is taking hold.”

Source: “Housing Declared Bottoming in U.S.,” Bloomberg News (April 25, 2012)

Fed Renews Vow to Keep Interest Rates Low.

Fed Renews Vow to Keep Interest Rates Low

The Fed voted this week to continue its near-zero interest rates policy for the next quarter and likely much longer.

The move will keep mortgage interest rates low in the coming months, if not years.

In recent weeks, mortgage interest rates have hovered around record lows, which has helped increase home buyer purchasing power as well as helped refinancers trim their monthly mortgage payments.

Last summer, the Fed made a rare move in vowing to keep the key rate near zero through late 2014. The move has been criticized by some who say it will cause inflation and awards spenders, not savers. Critics have pushed the Fed to reverse its policy.

However, the Fed says the subdued outlook for inflation has not warranted a change in its policies.

Federal Reserve Chairman Ben Bernanke, following the Fed’s policy-making committee meeting this week, affirmed the Fed’s intention to continue keeping short-term interest rates down until late 2014—and possibly even longer.

The Fed has kept short-term interest rates near zero since late 2008. The Fed has also acted to reduce long-term rates by purchasing Treasury securities and mortgage bonds.

The Fed’s policy-making committee also released its economic forecast, projecting moderate economic growth in the coming months before a steady pick up, as well as a gradual drop in unemployment. The committee also projects for inflation to remain under control, despite the recent rise in oil prices.

“If there’s a substantial change in the economic outlook in either direction, then there would be a change in the outlook,” Bernanke said. “But for now, I think the committee is comfortable.”

Source: “Fed to Keep Interest Rate Near Zero for Extended Period,” HousingWire (April 25, 2012) and “Fed Cuts U.S. Growth Forecast for 2013 and 2014,” The New York Times (April 25, 2012)

More Single Family Homes Turned Into Rentals.

More Single Family Homes Turned Into Rentals

As the number of for-sale homes listed on the multiple listing service (MLS) drops, the number of single family homes up for rent has been gradually increasing, RISMedia reports.

Single family home rentals are a growing business, as more investors buy up foreclosures at bargain prices and then transform them into rentals.

About 16 percent of all listings on the MLS are rentals, which is more than double the number of rentals listed in 2006, RISMedia reports. Single family rentals are often listed on the MLS by real estate brokers, whereas multifamily units typically aren’t.

The single family rental market now accounts for “21 million rental units or 52 percent of the entire residential rental market,” according to a new study by CoreLogic.

Single family rentals are usually very differently from multi-family homes. For example, rents for single-family rentals typically are 1.5 to 1.6 times higher than multifamily homes. Also, families and prior home owners tend to be attracted to single-family rentals whereas multifamily tenants tend to be younger, more mobile people who have never owned a home before.

Many of the single family rental tenants nowadays are former home owners who had faced foreclosure and can no longer afford to own. According to CoreLogic, more than 3 million home owners have been turned into renters over the past five years due to foreclosure.

Source: “Single Family Rentals Now Exceed Multifamily,” RISMedia (April 23, 2012)