As with the broader economy, there are signs of improvement in the housing market – or at least a bottoming process. The latest example came this morning from RealtyTrac, which reported foreclosures fell 6% in May vs. April.
In addition, mortgage applications have risen in recent weeks and speculative buyers are being very active in some of the hardest-hit areas, like Phoenix. Hedge fund manager and blogger Jeff Matthews writes the housing market is recovering faster than you think.
But like the broader economy, there are many obstacles in the path of a true recovery in housing, much less a rebound:
• Home prices remain elevated by historic levels, and analysis of other post-bubble episodes suggests a dip beneath the long-term trend is likely.
• Mortgage rates are rising. The average 30-year mortgage is up to 5.59% the highest in seven months, Freddie Mac reports, after recently touching 4.75%. This is going to crimp refinancing activity; meanwhile, Obama’s HARP program has only helped less than 13,000 homeowners refinance to date, The WSJ reports.
• U.S. consumers remain under tremendous stress because of high levels of debt and rising unemployment. Many observers believe May’s dip in foreclosures will prove to be a pause and expect delinquencies to start rising again this summer.
• Banks are tightening their lending standards after getting burned badly by their lack of standards earlier this decade.
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The bottom line is the housing market is not getting worse, but those expecting a rapid or V-shaped recovery are likely to be disappointed, just like with the broader economy.