Do Lower Inventory Levels Mean That a Building Boom is on the Way?

The latest existing home sales data was disappointing. However, the sales are being help back by something we did not think would happen this year–lower inventory levels.  If short sales continue to rise, which means foreclosures don’t hit the markets as we think they will–could this portend a surge in building this year?  The constructuion jobs created would spur further recovery.  Read the following articles from CNN/Money which are on point:

The housing market continued to struggle in March, despite low home prices and record low interest rates, an industry report revealed Thursday Sales of existing homes fell 2.6% compared with a month earlier, to an annualized rate of 4.48 million homes, the National Association of Realtors said. Gus Faucher, a senior economist at PNC Financial, called the report disappointing. “We were expecting an increase,” he said. “We need a turnaround to help the economy recover.” The Realtors’ group’s chief economist, Lawrence Yun, opted to look on the bright side of the report — sales were up 5.2% year-over-year. “We have seen nine consecutive months of year-over-year sales increases,” he said. “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year.” The choppy market stands in contrast to the continuing gains made in affordability. Factoring in price declines that have averaged about 34% nationally, according to the S&P/Case-Shiller home price index, and record low mortgage rates, homebuying is more affordable than ever. “For buyers who can qualify for a mortgage, now is a very good time to become a homeowner,” said Realtors’ president Moe Veissi. According to Yun, better economic conditions will push sales higher as the year goes on. “With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year,” he said. As the year goes on, buyers may find fewer properties to choose from. The number of homes for sale dropped 1.3% in March to 2.37 million existing homes. That’s a 6.3-month supply at the current sales pace. Inventory declined 21.8% compared with March 2011 and is well below the record of 4.04 million in July 2007. Ironically, the tighter supply may have cut into sales, with house hunters in some areas of the nation having trouble finding homes to suit their needs or tastes. “We’re already seeing this in the Western states and in South Florida,” said Yun. If the tightness in inventory spreads, it could signal a rebirth for home builders, who would have to step up development to fill the gap. And putting construction workers back on the job would be a shot in the arm for the overall economy as well as the housing market. “Conditions are in place for a turnaround,” said Faucher. “We’re just waiting for more confidence among buyers. We expect that to happen over the next few months. Source: CNN/Money

Short sales are surging this year, and if the trend continues, they could reach record levels in 2012, RealtyTrac reports. Short-sale transactions are starting to outpace foreclosure sales, as more banks see it as a better option to curb high losses from foreclosures. More mortgage servicers are also trying to increase the pace of approving short sales, a process that is generally viewed as drawn-out and lengthy. Short sales increased 33 percent in the last year, according to January data released by RealtyTrac. Thirty-two states saw year-over-year increases in short sales. Lender Processing Services Inc., which also recently released its January housing data, showed that short sales accounted for 23.9 percent of home purchases in January while foreclosures made up 19.7 percent of sales —the first time that short sales outnumbered forclosures. [We believe 2012 could be a record year for short sales,” says Daren Blomquist, vice president at RealtyTrac. Recently, the Federal Housing Finance Agency the regulator to mortgage giants Fannie Mae and Freddie Mac, issued new rules to speed up the pace of short sales. Mortgage servicers will be required to respond to a short-sale request within 30 days and make a decision about short-sale offers within 60 days. The new rules go into effect June 1. Source: CNNMoney

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