Positive outlook for US property market clouded by foreclosure worries
Predictions for property sales and house starts in 2010 in the US are more positive but analysts are warning that the recovery will be up and down.
Most believe that the real estate market has reached bottom and indeed prices are increasing in many states but there is still considerable confusion as indices report different figures and experts disagree over whether or not a glut of foreclosures will come onto the market and send prices into freefall.
Fitch Ratings increased its projections for housing starts and home sales for the first time in three and a half years, but warned even though recent statistical and anecdotal information points to a bottom for US housing market, recovery will be like a rollercoaster.
‘During the first 12 to 15 months off the bottom, the housing recovery may appear jaw-toothed as substantial foreclosures now in the pipeline surface as distressed sales,’ said managing director and analyst Bob Curran.
The foreclosure issue has prompted considerable debate.
The latest figures from ForeclosureRadar shows that in California, one of the worst hit states, foreclosure filings in September flattened from the previous month.
But they remain well above the levels from a year earlier.
However, in Arizona, another hard hit state, filings soared by 36.1% in September, according to data from ForeclosureListings.com.
Other states also saw a worrying increase, including Florida up 29.6%, Texas up 24.3% and Michigan up 18.22%.
The delinquency pipeline threatens to put as many as 2.7 million distressed sales on the market, according to Royal Bank of Scotland (RBS) economists.
‘A housing market that is just beginning to climb from the ashes would be unable to handle an influx of nearly three million additional homes for sale all at once,’ they said in a report.
But Radar Logic’s president Michael Feder is less worried.
‘The threat of pending foreclosures to the housing market is, in our view, overstated and we believe there is strong evidence that housing supply and demand are returning to more normal levels,’ Feder explained.
The latest residential property index from Radar Logic shows that home prices and home sales in 25 metropolitan statistical areas (MSAs) increased 1% and 1.9%, respectively, from July to August.
The National Association of Realtors is reporting that existing home sales increased nearly 10% from August to September, and sales activity is at its highest level since July 2007.
But the organisation is cautious about the recovery as the market is still underperforming.
‘While there are indications of price stabilization, there is a need for more buyers in the market,’ said NAR chief economist Lawrence Yun.