When President Obama delivers his annual State of the Union address Tuesday night, the economy will be a top issue — as will the housing market, which is still at the heart of the country's economic problems. Despite some encouraging signs from investors, housing starts are still low and foreclosure prevention efforts haven't done as much as hoped.
The Federal Reserve said this month that the crash in home prices has cost $7 trillion in household wealth, which has discouraged spending by people and businesses.
On the campaign trail in Florida on Monday, Republican Mitt Romney offered this assessment: "It doesn't have to be like this. It can get better; it will get better."
Romney and his fellow GOP presidential candidates haven't offered many specifics about how housing will get better, or when. "I can't predict when it's going to get better other than if I'm fortunate enough to become president I will care very deeply about getting it better in a big hurry," Romney said.
'Encouraging' Signs From Investors
But it is at least possible now to take a glass-half-full view of things. Mark Zandi, chief economist at Moody's Analytics, has been tracking the housing market closely and advising policymakers in Washington.
"The six-year-long housing crash is coming to an end," Zandi says. "It's not quite over. I think we've got a bit more to go with respect to house price declines. But for the first time since late 2005-06, I think the trend lines look actually quite good for housing."
Zandi says the pace of home sales is picking up. But that does not mean that lots of average Americans are jumping back in, getting loans, buying houses and brimming with confidence. Many of those sales are actually investors using cash to buy foreclosed properties. That might not sound so good, but Zandi likes to see that.
A Drop In New Housing Units
The number of new homes under construction dropped off drastically in recent years. It's likely to be two or three years before the housing market starts to look healthy again, analysts say.
"Investors are probably about a third of the existing home market right now — a very important part of the market, which is very encouraging. They sense value," he says.
Zandi says prices have fallen enough that investors can come in, buy the properties, rent them, cover their costs and hold on. "These aren't flippers," he says. "They're looking out three, five years."
No comments:
Post a Comment