Beginning Now: U.S. Housing Making Strong Advances

July 25, 2012 / Russell Legato, Residential Property Analyst

Housing recovery is on the horizon and is expected to cause a large increase in the sale of new homes. The factors contributing to this welcome trend are reported by Goldman Sachs Group. They include job growth, a decline in the number of available properties on the market and increasingly higher prices.

Beginning Now: U.S. Housing Making Strong Advances

Orders have increased and the number of existing homes for sale decreased. The still falling mortgage rates are at a record low. New-home construction of single-family dwellings increased by 4.7 percent in June. The 539,000 increase for a twelve-month period was reported to be the fastest in the last two years.

Risks that the housing market faced are now alleviated. Reports indicate the rise in prices of homes will propel a three to seven year upwards trend in the United States. When the recession came to an end in 2009, enough new jobs were made available to promote the sale of new homes. The Commerce Department said this was the highest rate seen since 2010.

Supply is the focus of government policy. In the past, it was focused on demand. Foreclosed single-family houses have been sold and investors are renting them out after purchasing them. The government is also expanding the Home Affordable Refinance Program for refinancing for the houses that have mortgages owed that are over the assessed value of the properties.

Shadow inventory is defined as those homes projected to be offered for sale through foreclosures and short sales. This shadow inventory has decreased by 15 percent in a number of states. Included are Nevada, Texas, Arizona and Florida. Growth in the number of building permits issued indicates a demand in those states named above that mark the beginning of a 35 percent increase in demand.

The investors are scooping up remaining foreclosures, thereby decreasing shadow inventory. Experts say if the available inventory is reduced further, prices will rise and sales will rise as well. The home builder index calculated by Bloomberg Industries slipped by 0.5 percent due to U.S. stocks responding to the European debt crisis. Conditions around the world are affecting the U.S. economy, including the job market and the real estate market. What is going to happen next to the U.S. housing market?

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