Over the past months have been dispelled some of the dark clouds threatening the global economic recovery. While new threats have emerged as the sharp rise in oil prices following the political crisis in several Middle Eastern countries, the performance of most economic indicators in recent months indicates a greater strength. In the case of EU, we have seen a significant upturn in industrial activity and consumer confidence and even a nascent recovery in employment levels. Both tax incentives and massive liquidity injections by the Fed have played a key role in supporting economic growth. This improvement in growth prospects, which has been moderate in recent weeks, was reflected in an almost uninterrupted rise nearly five months in the stock markets.
However, in one of the pillars of U.S. economic recovery has been conspicuous by their absence.
After showing signs of stabilization and recovery during the second half of 2009 and part of 2010, the residential housing market takes about six months in decline and house prices in the U.S. have taken up the lowest observed in the first quarter of 2009.
More than a year ago in this space mentioned that the then-current recovery in the residential market could be a mirage and that the situation was still fragile. The main reason for our concern was that despite the recovery in housing prices between May and December 2009, almost a third of all homes purchased with a mortgage (almost 15 million households) had a value of below market mortgage size that was purchased. At the time mentioned in that context was very likely that many families prefer to stop paying your mortgage and allow the bank to be awarded the property before you continue making payments on a house whose value was much lower than the credit with which it was purchased. At that time we argue that more allotments would mean more sales by auction and therefore more pressure on home prices. The median home price nationally, as measured by the S & P Case-Schiller, is again 30% below its peak in mid-2007. Of the 20 metropolitan areas covered by the index, only two managed to report a growth in the last 12 months (San Diego and Washington DC). Also, there were 11 cities (Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland (OR), Seattle and Tampa) that recorded new lows.
Despite the positive signs in other sectors of the economy, there is little reason to expect a turnaround in the situation of the residential market. While there is a significant inventory of homes for sale, it is difficult to see a recovery in the prices of these. It is important to recognize that while builders are beginning to reduce its inventory of unsold new homes, this is happening amid a considerable adjustment in price levels. Additionally, despite the lack of activity in the market for new housing construction, the number of existing homes entering the inventory of homes for sale continues to grow. These are homes that are in default on their mortgages but where it is completing the legal process of adjudication and sale by creditors.
In conclusion, it is likely that in the absence of demand for house purchases and the increased supply will be necessary to observe a greater adjustment in average price nationally for balancing the housing market and lay the groundwork for a solid recovery.
However, in one of the pillars of U.S. economic recovery has been conspicuous by their absence.
After showing signs of stabilization and recovery during the second half of 2009 and part of 2010, the residential housing market takes about six months in decline and house prices in the U.S. have taken up the lowest observed in the first quarter of 2009.
More than a year ago in this space mentioned that the then-current recovery in the residential market could be a mirage and that the situation was still fragile. The main reason for our concern was that despite the recovery in housing prices between May and December 2009, almost a third of all homes purchased with a mortgage (almost 15 million households) had a value of below market mortgage size that was purchased. At the time mentioned in that context was very likely that many families prefer to stop paying your mortgage and allow the bank to be awarded the property before you continue making payments on a house whose value was much lower than the credit with which it was purchased. At that time we argue that more allotments would mean more sales by auction and therefore more pressure on home prices. The median home price nationally, as measured by the S & P Case-Schiller, is again 30% below its peak in mid-2007. Of the 20 metropolitan areas covered by the index, only two managed to report a growth in the last 12 months (San Diego and Washington DC). Also, there were 11 cities (Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Portland (OR), Seattle and Tampa) that recorded new lows.
Despite the positive signs in other sectors of the economy, there is little reason to expect a turnaround in the situation of the residential market. While there is a significant inventory of homes for sale, it is difficult to see a recovery in the prices of these. It is important to recognize that while builders are beginning to reduce its inventory of unsold new homes, this is happening amid a considerable adjustment in price levels. Additionally, despite the lack of activity in the market for new housing construction, the number of existing homes entering the inventory of homes for sale continues to grow. These are homes that are in default on their mortgages but where it is completing the legal process of adjudication and sale by creditors.
In conclusion, it is likely that in the absence of demand for house purchases and the increased supply will be necessary to observe a greater adjustment in average price nationally for balancing the housing market and lay the groundwork for a solid recovery.
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