Although two major reports on housing issued this week contained mixed news, the overall outlook is still nothing to cheer about.
A report on Monday from the U.S. Census Bureau and the Department of Housing and Urban Development shows sales of new single-family houses in August were 2.3% below the revised July rate.
And for worse news about the housing market, UC Irvine professor Kerry Vandell has a bleak opinion on when it will start to return to normal — hint: it's probably later than you think.
In 2008, when the housing bubble burst and the world economy began to tank, many economists and housing experts at the time said 2011 was when things would likely get back to normal. The more negative of the lot put a return to market normalcy at 2012.
Nowadays, getting to a normal housing market by 2012 might be considered wishful thinking.
Vandell, dean's professor of finance and director of the Center for Real Estate at UCI's Paul Merage School of Business, believes the market will finally stabilize and homes will again begin to appreciate in value sometime around 2014.
"I don't see any movement toward significant appreciation until the market comes into balance, and I don't see that for another two or three years or so," Vandell said.
But Vandell's forecast is not all bad.
"I don't think there's going to be a lot more downside," he added.
In fact, it wasn't all bad news this week on the housing front. A report on Tuesday — the S&P/Case-Shiller home price index of major cities — shows prices in July climbed for the fourth month in a row. Prices rose 0.9% in July compared with June, but they're still 4.1% lower than a year ago.
"With July's data we are seeing not only anticipated monthly increases, but some fairly broad improvement in the annual rates of change in home prices," David M. Blitzer, chairman of the index committee at S&P Indices, said in a statement.
In his statement, Blitzer added: "While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery."
Housing market problem No. 1, in Vandell's estimation: supply and demand.
"We have an excess supply situation," Vandell said.
In short, there are more sellers than buyers. And part of that problem is many people can't qualify for a loan, Vandell added.
"On the sales side, part of the problem is that even though interest rates are at historically low levels, you have stricter lending guidelines," Vandell said, adding, "there are a number of folks out there who can't refinance."
And those who can afford the minimum 20% down payment required to buy a home nowadays, and if they have a golden credit report, have very little interest in buying now thanks to low expectations of appreciation in the price of homes for some time to come.
"There's a lot of lack of consumer confidence out there and a lack of one's confidence in their employment situation," Vandell said. "Until their situation is more certain, I think they're going to be holding off."
But Vandell has some good news for the Orange County market. The professor, like many real estate experts on the record about the area's housing market, believes Orange County is better poised for recovery than much of the rest of the nation.
"I think Orange County is in better shape than the country on average," he said. "It has a restricted supply side that is very costly and few new housing starts. It's not like Dallas or Houston."
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