By Mike Colpitts
Where home prices are still declining they are deflating at a slower rate for the second year in a row, a new Housing Predictor survey has found. The hardest hit markets in the nation, including places in California, Nevada, Arizona, Rhode Island and Florida are experiencing less deflation than in early 2010.
Part of the slowdown may be attributed to fewer foreclosures coming on to the market in some sectors of the nation, especially the north-east. Other areas are under going regional weakness in employment growth. An over-whelming 84% of markets tracked by Housing Predictor that are sustaining price drops are seeing deflation slow, indicating that conditions are improving.
Fannie Mae’s chief economist is optimistic about the housing market. “Despite rising mortgage rates, our forecast for home sales is stronger than the previous forecast, given our brighter economic growth and labor market outlook,” said economist Doug Duncan. “We expect modest increases in home sales, despite recent interest rate rises, due in part to modest additional declines in home prices.”
Mortgage lenders’ turning a blind eye to qualification criteria and Wall Street efforts to sell as many securities as possible to rake in profits toppled the real estate market, and sent home prices crashing as investors headed for the exits. Then the financial crisis turned the housing market into a mess, but stabilizing factors in many areas of the country are developing.
After more than five years of housing deflation in the hardest hit areas of the country some especially damaged markets may finally be close to reaching a bottom after the biggest bust in decades. As forecast a year ago by Housing Predictor, even Miami, Florida one of the epicenters of the crash is turning around with improving home and condo sales.
In Southern California’s Inland Empire the housing inventory is low in Riverside, where home foreclosures decimated the market. Bargain-hunters are having trouble finding those low priced deals.
Based on sheer volume California had been the hardest hit state in terms of volume in the U.S. But home prices even moved higher for a time in many areas of the state as a result of double state and federal tax credits for home buyers. More than a month after the last credit expired at least prices aren’t falling as fast as they were.
Markets in the Mid-West, South and North-east in 17 states are forecast to experience housing inflation in 2011. The recovery for the hardest hit regions of the country is projected to be a bit slower as the nation deals with getting accustomed to a new sort of economy and way of life.
Rebounds are typical of the cyclical nature of real estate markets. Since Wall Street developed new products to artificially inflate housing prices, and mortgage lenders developed new loan products so they could make a loan to practically anyone this recovery is taking much longer than others in the hardest hit areas of the country.