A recent article at MarketWatch cited Harvard University’s annual State of the Nation’s Housing report, released on Thursday. It showed improving statistics for a housing market in recovery, but the economy is keeping markets from improving quickly.
“With new home inventories at record lows, unless the broader economy goes into a tailspin, stronger sales should further stabilize prices and pave the way for a pickup in single-family housing construction over the course of 2012,” said Eric S. Belsky, managing director of Harvard’s Joint Center for Housing Studies, in a news release.
We are seeing this on the Big Island as well with the shrinking inventory of existing homes and condos, let alone new construction.
The article points out that rental vacancies are falling, rents are increasing and multifamily construction is on the rise. Existing home sales were up 5.2% in the first quarter compared with levels one year ago, and sales of newly constructed homes were up 16.7% in the first quarter, compared with a year ago.
The report notes that many people have been on the fence trying to decide to buy now or wait for the economy to improve. “As markets tighten, these fence-sitters may begin to take advantage of today’s lower home prices and unusually low mortgage rates. With rents up, home prices sharply down, and mortgage interest rates at record lows, monthly mortgage costs relative to monthly rents haven’t been this favorable since the early 1970s,” Belsky said in the release.
Buyer and Seller Difficulties
One of the things holding the market back is the difficulty in getting loans. The report points out that 33% of member brokers of the National Association of Realtors reported contract failures in December — a jump from 9% a year earlier — due to mortgage applications being denied, or the appraised value of the home being lower than the negotiated price.
On top of that, many people who would like to sell their home owe more on their home than it’s worth. According to the report, one in five mortgage loans were underwater in the fourth quarter, which cites figures from CoreLogic.
For buyers on the Big Island who want to know where the market is going, it looks like the bottom is behind us. Now, we just have to see how fast the recovery can be.