Housing Recovery in Progress: Not a Done Deal

July 23, 2012 / Russell Legato, Residential Property Analyst

The current status of the housing recovery is that it is still recovering (present tense), not recovered (past tense). According to the economic reports of the week, there is activity. But, in the time period between now and the end of the year 2012, it is expected to continue, but will be incomplete. However, it is not stagnant. It is moving forward.

Housing Recovery in Progress: Not a Done Deal

Obstructions to full recovery include high unemployment and resistance to deleveraging efforts. Cheap mortgage rates could not combat those conditions adequately. The real estate market will continue to recover according to economic experts. It will be slower than we would wish though.

Economists see the National Association of Home Builders index moving upwards a point at a time. It increased to 30 in July and it was 29 in June. Sales of existing houses are predicted to increase to 4.64 million. Housing starts (new constructions) are predicted to go to 745,000 for June. They were only 708,000 in May.

On the negative side, there have been unimpressive economic signs in the previous weeks. Ben Bernanke, the Fed Chairman, is due to testify before congress Tuesday and Wednesday about the country’s economic future and appropriate monetary policy. Will there be plans for delivering more stimuli in the form of cheap money?

Consumer prices have remained stable over the last month. This allows the Fed more leeway. Prices, with the exclusion of energy and food costs, are up by 0.2 percent. Other indications are housing starts, which increased by 5.2 percent; purchase of building permits went up 8.4 percent; applications for unemployment went down from 365 thousand to 350 thousand; and sales of existing houses went from 2.0 percent to 1.5 percent.

There is a book out by Marc Faber, a man also referred to as Dr. Doom. It’s called Gloom, Boom, and Doom Report. He predicts a recession on a global level to be imminent, either this year or in 2013. He refers to the slowdown in China and India and says no investors are taking note due to the media stories focusing on Spain and Greece. In addition, spending at Tiffany’s decreased. Obviously, the wealthy spenders are slowing their spending activities too.

Another author of a book featuring a prediction of gloom is Wiedemer, who predicts employment to go down to 50 percent with 100 percent annual inflation. He says it will start in late 2012. Two questions we are left with are will time prove either of them right? And, how often have soothsayers predicted the world’s end?

And, has it ever actually ended?

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