Is it safe to say that the economy and the housing market have finally found solid footing? Three different financial services organizations have come out with strong endorsements that better days are around the proverbial corner.
Mortgage Bankers Association (MBA) Vice President of Research Michael Fratantoni, speaking yesterday before the trade group's National Technology in Mortgage Banking Conference & Expo, gave a thumbs-up to the U.S. economy's viability.
‘Honestly, things are looking better,’ Fratantoni said. ‘We're looking at a turning point in the housing market. There are some concerns about regulatory matters, but overall I think we're on the verge of a self-sustaining recovery. Three years past the recession we've seen a slow, but sustained recovery. It's not as fast as we'd like, but it's been picking up steam.’
Fratantoni stated the economy has recorded an average of 2% gross domestic product growth, which he expects to continue through this year and into next year. While acknowledging economic instability in Europe and Asia and the likelihood of increased property taxes by many fiscally strapped state governments, Fratantoni pointed to consumer spending as evidence that the economic situation has improved.
‘People are buying cars again,’ he said. ‘In the recession, consumers bought only 6 million cars; last year, that was up to 14 million. We're seeing significant pickup in auto sales quarter after quarter.’
On the home sale front, Fratantoni worried that rising interest rates would negatively impact refinancing. But he added the MBA is projecting a 10% rise in home sales this year.
‘There's a real sense that the market has turned,’ Fratantoni said. ‘We're improving, but we have a long way to go.’
Separately, a national survey of RE/MAX agents has concluded that the housing industry is ‘staging a recovery with increasing sales and stabilizing prices.’ In a survey of 1,022 real estate agents, four out of five believed U.S. home prices will not decline further and nearly 70% predicted prices will go up, led by a strong demand for homes in the low to middle price ranges.
‘To active real estate agents, this market is definitely heating up,’ says Margaret Kelly, RE/MAX CEO. ‘They are witnessing a recovery across the country fueled by home buyers and sellers taking advantage of a significant market opportunity.’
The agents' opinions, which were documented in the quarterly RE/MAX Market Insights, determined that roughly one-third of prospective homeowners are first-time buyers, while another third are homeowners looking to sell so they can move up or downsize. The remaining third are mostly investors who believe the market has hit bottom.
RE/MAX also found that one in five buyers pays for a house in cash, receiving an average discount of 15%. Most homeowners appear to be looking for less-expensive houses: 80% of surveyed agents say the demand for lower-priced properties is good or very good, while 58% say the demand for high-priced homes is fair to poor.
Positive vibes are also emanating across the border. Sal Guatieri, senior economist at Toronto-based BMO Capital Markets, is urging Canadians to consider buying residential property in the U.S.
‘While there's little urgency, now is likely a good time to buy U.S. real estate in regions with relatively low foreclosure rates, as conditions should improve enough to put a floor under prices this year,’ says Guatieri. ‘The inventory overhang has ebbed, prices are low, and some pent-up demand exists. However, patience is a virtue for bargain hunters in areas saddled with distressed properties.’
According to a new BMO Capital Markets report, the U.S. housing market remains soft and prices are likely to stabilize in 2013. Demand for U.S. housing should increase on firmer job growth, improved affordability and easier lending standards, the report adds.
‘With mortgage rates at record lows and resale prices down 34 percent from the peak, only 12 percent of gross median family income is needed to finance the purchase of a typical house – nearly half the long-term norm,’ notes Guatieri. ‘In fact, it's cheaper to own than rent in many regions.’
(Photo courtesy of the Library of Congress)