Recent economic reports have offered mixed results as we’ve seen Housing Starts and Building Permits tick up, but Home Prices decline. Most concerning of all, Existing Home Sales Supply catapulted to a record high of 12.5 months… indicating a growing glut of homes for sale with unwilling buyers despite historically low interest rates.
These are figures that will only prolong the recovery in housing, especially if permits and starts are ticking higher while existing home sales continue to wallow. This is likely a product of a combination of the tax credit expiration, as well as home foreclosures piling up.
Further exacerbating the problem is the continued weakness in the labor market, leaving buyers reluctant to make home purchases despite low interest rates. Nonetheless, the National Association of Realtors Housing Affordability index shows that the stage is set for buyers, as median income and median home prices have converged to levels not before seen in 24 years of keeping the data.
All of this seems to spell out what we already know - that there is uncertainty in the housing market, hesitation by buyers, and tinder for a sharp recovery.
Other than the typical, “wait-it-out” resolution, policy makers are considering two potential catalysts for change in the housing market: the possibility of greater lienency with modifications replacing growing numbers of foreclosures (something that has already begun to offset worsening mortgage-default figures), and an outlying proposal that would enable homeowners to rent their homes from mortgage holders for a specified period in order to avoid foreclosure.
Both of these near-term “solutions” entail significant government intervention in a free market, something that has become the trademark of the new millenium. How the situation will ultimately be resolved remains to be seen, but is anxiously awaited.