Housing Numbers

Great little article by our friend Bill Fisher at Ratewatch.com on the housing market and where we are headed in the housing market and what we need to do to get the housing market healthy.

Housing starts in the month of March declined by a striking 5.8%. This takes some of the wind out of our sails. Obviously, we don’t get to continue moving toward a sustainable recovery on a straight, easy-to-negotiate path.

That should not surprise us, though it shakes us up a bit. The other possibility, of course, is that we’re not moving securely down the recovery trail, and the remaining gloomsters who see us—particularly the real-estate housing market—dropping off the edge of the earth sometime soon are giving each other high-fives because of their seeming sagacity.

Pay no mind—not even to the wonderful Nouriel Roubini. We are still headed in the right direction, for the most part. After all, the seemingly self-negating portion of this indicator was that, while March housing starts fell by 5.8%, builders bought up 4.5% more housing permits than they did in February.

Does this mean that builders are less sanguine about today’s housing market but, at the same time, a bit more optimistic about the future of the housing market—say, three or more months out?

It very well may. And it would serve us well to remain aware of the fact that large construction firms, lenders and real estate brokers are readying themselves for sizable growth in real estate sales—not tomorrow, but medium-term. We read a lot about how things will be visibly improved in 2013. We’ll see. Meantime, we ready ourselves for the possibility.

Actually, last week’s was a tepid serving of economic indicators, at best. Even the fact that the Freddie Mac average fixed rate for 30-year mortgages fell to within one basis point of its all-time low of 3.87% barely elicited a smile on the face of the markets.

One little piece of information, though, seemed to me extremely relevant—and under-reported: This past January saw more short sales close nationally than foreclosures. Stay with me on this.

The number of foreclosures on the market has tightened up a bit. The people at DataQuick, who watch this sort of thing, warned us not to get too excited because there is still a mountain of foreclosures to process. The lenders, they said, are just pausing for a time—then watch out! Foreclosures everywhere we look!

But here’s how it’s currently working. Lenders are, at long last, discovering that they can process short sales in less time and at significantly less cost than foreclosures. Consequently, they’re putting fewer foreclosures on the market. Consequently, market inventory of distress properties has declined. And consequently, fewer homes
are selling each month.

However, more homes are selling in short sales, which—if done right—make everyone a lot happier and cost less to accomplish. Good deal! We may at last be in the first stages of developing short sale systems that are truly efficient and cost-effective.

And these short sales (I’m going out on a limb here) may prove to be the first version of a new generation of mortgages that meet the needs of individuals more precisely—and are far less likely to be hit by defaults.

Lastly, of course, amore efficient use of short sales is surely the best way to establish the floor of today’s real estate values and to get distress sales off the back of our real estate market. The overall economy of this nation would benefit greatly from that.

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