US housing market hitting slowest period of year
Monday, September 08, 2014
As per the latest Trulia report, the U.S. housing market is headed for its slowest period of the year. Online search indicators have shown that the peak the housing industry enjoyed until early summer has shown signs of decline. Since July, the market has dwindled to below-average sales.
The National Association of Realtors, which announced a 3.3 percent gain in pending sales in July, has warned of a fall to come. Even though the prices have increased in the past two years, they are still 17 percent below the peak reached the housing collapse of early 2006.
The pattern is that of a typical seasonal slowdown, but what is worrisome here is that the housing market is still not equipped to deal with these fluctuations. Through 2012 and 2013, housing prices rose at a steady pace while mortgage rates have remained low, leading to large-scale jubilation among buyers, sellers and the industry at large.
Even though the mortgage rates are still low and inventories up, experts are no longer upbeat. The reason for this is the still-ailing economy, slow markets and uncertain job scenario, which has not been able to keep pace with the rising home prices. Even the low mortgage rates are not enough to ensure bigger savings or low recurring costs, two major incentives for home buyers today. Worsening affordability has coincided with tight credit, which has contributed to scare away the buyers.
Though the growth will not stop and the situation will not worsen as during the recession, the industry is no longer foreseeing sudden or sharp increase in sales for the rest of the year, a thought mirrored by the Mortgage Bankers Association. According to the S&P/Case-Shiller 20-city index, home prices have only increased 8.1 percent from July last year, the lowest mark since January 2013.
These developments have somewhat stemmed the positive forecasts about the housing industry. The Mortgage Bankers Association, which had predicted $202 billion quarterly sales in the beginning of the year, has now toned it down to $159 billion. Decreasing sales pace in the second quarter has also led Fannie Mae to change its upbeat stance about the housing market, which they had said would drive the new economy.
For some experts, however, this is not as bad as it sounds. They think the slow pace will stem the housing market from becoming overvalued, as it did before the recession. Following the S&P/Case-Shiller home price index, there is a general consensus that the long-term average is now proportionate to the population size. In the last two years, the index has steadily risen every month instead of displaying sudden highs and lows, which tends to discourage buyers from investing.
This slow and steady pace may seem disheartening, but will in the long run lead to solid recovery in home sales figures and sales activity. Even though the two schools of thought sound opposing, in reality they are both concerned with one thing — a sure recovery for the housing market that could very well be the foundation for the future of our economy.
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