Residential real estate continues to be hampered by underwater mortgages and REO inventories.
First the good news…
- Housing starts will surge 19% this year to 725,000 from 609,000.
- Sales of new and existing homes are on track to rise about 3% (340,000 and 4,500,000 respectively).
- The median prices of existing homes climbed over 10% in April, the strongest gain in six years.
- Mortgage rates are the lowest they have ever been since tracking began in the mid ‘70s, with 30 year rates at 3.78%.
- The total months supply of existing homes for sale remains well below the peak of 12.4 in 2010.
- Housing starts are still significantly lower than the 2 million per year experienced at the peak of the market, and home construction will only be 3% of GDP, versus 6% traditionally.
- Sales of new and existing homes are still less than half what they were at the peak of the market.
- Almost 1/3 of U.S. homeowners still have mortgages underwater, and cannot sell their homes.
- Mortgage lending standards remain very tight.
- There is still a large “shadow” inventory of REO properties dragging on the market.
What’s the bottom line?
- Don’t get too giddy about 2012 being the strongest spring for the housing market in 5 years. The overall 2012 recovery in residential real estate will be modest, with sales, new starts and prices bumping up and down month to month.
Interesting trends to note…
- Builders are putting up smaller homes closer to urban areas.
- Bank of America is piloting a “mortgage to lease” program to distressed homeowners in California. Homeowners stay in their homes as renters, while BoA sells the homes to investors.
- The suburbs have been dethroned. Real estate values are now highest in urban neighborhoods where work, home, shopping and recreating are all accessible by walking, biking, or transit.
Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes for TheTentacle.com.