Tags: housing

Housing News Points to a Slow Recovery

By    |   Tuesday, 20 Oct 2009 04:32 PM

Housing starts reported by the Commerce Department were lower than analysts expected, and this is good news. It means that builders are trying to decrease inventories which would support higher prices.

Much of the recent buying has been related to an $8,000 tax credit that is due to expire on Nov. 30. Builders know that demand will decrease when the incentives expire.

The bad news is that they are still building more homes than consumers are likely to want to buy.

The Commerce Department report showed that building began at an annual pace of 590,000 homes. On average, these homes will be completed in about nine months. Similar numbers enter the market every month.

The most recent sales data shows that consumers are buying about 430,000 new homes a year. This is lower than the historical average and most likely due to the large number of used homes on the market. Unsold homes increase inventory and decrease prices.

Foreclosures also continue to add to inventory. Market experts at RealtyTrac expect nearly 3,000,000 homes to be foreclosed this year.

In addition, an impending and large wave of mortgage resets could lead to even more potential sellers.

Option ARMs, which include many no-documentation loans, start coming due next year, and buyers who couldn’t qualify initially for mortgages are now facing near-certain foreclosure under tighter underwriting standards.

With most signs pointing toward home lower prices in the future, even more buyers may wait and force prices even lower.

Housing, in all likelihood has a long ways to go before a sustainable price rise takes hold.

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MichaelCarr
Housing starts reported by the Commerce Department were lower than analysts expected, and this is good news. It means that builders are trying to decrease inventories which would support higher prices. Much of the recent buying has been related to an $8,000 tax credit that...
housing
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2009-32-20
Tuesday, 20 Oct 2009 04:32 PM
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