Equifax

Finance Blog

Housing Market Predictions: Where Did the Recovery Go?

Written by Steve Cook on April 1, 2011 in Real Estate  |   No comments

Housing Market Predictions: Where Did the Recovery Go? By Steve Cook, Real Estate Economy Watch Let’s start with the experts. Every month for six months a panel of 111 leading housing economists, real estate experts, and investment and market strategists assembled by Robert Shiller, the…

Housing Market Predictions: Where Did the Recovery Go?
By Steve Cook, Real Estate Economy Watch

Let’s start with the experts. Every month for six months a panel of 111 leading housing economists, real estate experts, and investment and market strategists assembled by Robert Shiller, the man who called it right on the housing bubble, has grown more pessimistic.

In March, their consensus hit a new low. They see only a weak recovery taking place two years from now, though a few respondents do see a real recovery, predicting prices up 20 percent or so by 2015.

“This uninspiring view must be influenced by the persistently weak market fundamentals—high unemployment, supply overhang, an unabated foreclosure crisis, and constrained mortgage credit,” said Shiller, who is also cofounder and chief economist of MacroMarkets, the firm conducting the monthly survey of experts.

Experts like Shiller’s group have been wrong as often as they have been right on the housing recovery, but just hours before they released their survey, the housing world was rocked by two confirming reports.

The National Association of Realtors reported that February home sales fell 9.6 percent from January. Prices fell to the lowest level in nine years. “The results called into question whether the U.S. housing market is recovering or falling further,” said the Wall Street Journal. Then the Federal Housing Finance Agency confirmed that January home prices nationally have fallen to the lowest point since May 2004 and are 16.5 percent below the April 2007 peak during the housing boom.

Double-dip, anyone?

All the valuation achieved by the housing tax credits has evaporated and then some. From the point of view of the millions of homeowners trying to stay above water on their mortgages, we’re worse off than ever.

Whether the experts are right or not, we can safely make several housing market predictions about the eventual recovery.

The first housing market prediction is that the recovery will not be national, or even regional. Rather, recovery will occur market by market, based upon three factors: employment, distress sales, and inventories. Where unemployment is stable or easing, foreclosures declining, and inventories within a six months’ supply, prices and values will improve no matter what is happening. A handful of markets—Honolulu; Washington, D.C.; San Diego; San Francisco—may have already achieved stabilization. Other markets, where foreclosures are continuing and jobs are still threatened, may not see recovery for three or more years.

The second housing market prediction is that the foreclosure era will end. It’s just that no one is quite sure when. For nearly a year, mortgage delinquencies and defaults have slowly but surely declined, reducing the number of properties entering the foreclosure pipeline. Unfortunately, the foreclosure pipeline is crammed with properties from the so-called hidden inventory and the mess caused by poor servicing practices. The result is that right now we are seeing only near-record distress sales, which are terrorizing home values, not the relief that will follow.

Third housing market prediction: when the recovery does come, the “good old days” won’t return overnight, if at all. It will take years for values in most markets to return to the levels of 2006. Foreclosures also won’t disappear overnight; they will gradually decline. More important, modest price increases will unleash a torrent of new listings from owners who have been biding their time until their local markets improved 5 or 10 percent. Studies of this “pending supply” suggest there will be enough of this new inventory to dampen local prices. The good news is these are move-up buyers who will add to local demand.

Another reason the good old days will never return is that structural changes have occurred during the five years of the housing bust. The most important is a decline in homeownership, not only as a statistic, but also as a goal of American households. A smaller percentage of American households own their own homes today than at any time since 1998, a dramatic decline from the all-time high in homeownership just six years ago.

Fewer Americans want to become homeowners. Fannie Mae’s quarterly housing survey found that the percentage of Americans who believe buying a home is a safe investment has fallen six points to 64 percent since January 2010 and 19 points from 2003, when a similar survey was conducted. Certainly, some of this sentiment reflects the pain consumers have suffered over the last five years, and homeownership may regain popularity with time and good fortune. In the meantime, though, a 20 percent decline in homeownership demand will create an entirely different real estate economy than the one we remember.

Steve Cook is Executive Vice President of Reecon Advisors and covers government and industry news for the Reecon Advisory Report.


During his 30 year career in public relations and journalism, Cook has been a print and broadcast news correspondent, served two Members of Congress as press secretary, was a senior executive in the world’s largest independent public relations firm in Washington and Chicago and was vice president of public affairs for the National Association of Realtors from 1999 to 2007.At NAR, Cook supervised external communications including news and editorial coverage, video production, speech writing and communications strategic planning. He helped to manage NAR’s multimillion dollar network advertising program.

Cook is a member of the National Press Club, the Public Relations Society of America and the National Association of Real Estate Editors, where he served as second vice president. Twice he has been named one of the 100 most influential people in real estate. He is a graduate of the University of Chicago, where he was editor of the student newspaper. In addition to serving as managing editor of the Report, Cook provides public relations consulting services to real estate and financial services companies, and trade associations, including some of the leading companies in online residential real estate. 
READ MORE:

No comments yet


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Real Estate Archive

Stay Informed Sign up for our FREE Equifax email Newsletter