No Recovery for Housing Yet

April 13, 2011 / Russell Legato, Residential Property Analyst

The housing sector is not expected to recover this year despite improvements in the employment, international trade, manufacturing and professional services sectors in the US economy.

No Recovery for Housing Yet

Residential investment is only 2.4 percent today compared to 6.3 percent before the housing bubble burst, according to former International Monetary Fund chief economist Michael Musa.  Distressed sales last February, the last full month for which data is available, accounted for almost four of every 10 homes sold (forty percent), a large gap from 18 percent, which was the rate for March last year.

Moody’s Analytics chief economist Mark Zandi expects home prices to bottom out this year and recover next year. He says that as markets go through a bulk of distressed sales, house prices are most likely to reach its trough by the end of this year. Sales, construction and prices are expected to go up only by this time next year and it won’t be until such that the housing sector will also recover.

Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, NC, thinks otherwise. For him, the housing market will only return to normal on 2016, four years later than Zandi’s expectation. He says that if we assume that 2.8 million people, 1.3 million houses are added to the US every year and 200,000 houses are torn down, the housing sector will not really get to normal until 2016.

Bank of America Merrill Lynch housing economist Michelle Meyer is blunt about the national housing market. She believes that the bottom line is that housing conditions vary significantly by region, zip code and even street and those in the market, either buyers or sellers, do not expect a normal experience, because it does not exist.


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2 Responses to “No Recovery for Housing Yet”

  1. Michelle Meyer is correct – houisng is a local issue and there are a number of markets that are doing well right now such as Washington, DC and most of Texas.

    Mark Vitner is also correct but fails to recognize that this population growth occurred in 2007, 2008, 2009 and 2010 and that new housing, currently at the lowest inventory levels ever, was under-built over thae past four years. That would accelerate his projected recovery to 2012.

    And that makes Mark Zandi’s projections right on traget.

    • Dan Thomas says:

      I believe Mr Levitan is incorrect. DC is doing well only in specific areas, and most of the country flounders. Housing delaults need to peek and we are a long way off from this occurring. Lawrence Yam has repeatedly promoted this illogical thinking, predicting a positive housing market within a cant 6 months
      It never seems to happen and only seems to be promoted by RE professionals and mortgage agencies.

      Thats the answer

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