US housing market showing some early signs of stabilization
With a $2-trillion (US) loss in the housing valuation wealth form the market peak, consumers in the US are conserving cash and recovery has been slow. Some speculate that the market there may have hit bottom as far back as 10 months ago. "Recovery depends on variety of conditions, from mortgage rates to employment rates" says economist Lawrence Yun "but sales are rising sgnificantly in some US markets".
As the US economic recession continues to play out we continue to watch its impact on the housing market. US unemployment rates in the US have been rising for the past nine months and are expected to reach 7% by 2009. During the recession in the 1970's there was little change in homes sales. In the 1980's steep mortgage rates caused a decline in housing sales, while the early 1990's recession saw only a moderate decline in sales. A recession in the early millennium had no negative impact on sales, in fact housing sales increased. So much depends on consumer perception, which makes it difficult to forecast this recession's impact.
As prices in the US have declined since 2005, housing has become more affordable and many people are wondering whether they should still wait to buy or sell. Current data released at the annual convention of the National Association of Realtors (NAR) in Orlando, Florida this past November show stabilization beginning to occur with a slight national increase in sales. Inventory is still quite high, with a 10 month supply still on the market. Foreclosures are still rising caused by the sub-prime default rate, with nearly five percent of all mortgages each quarter failing because of the sub-prime issue. The government aims to help stabilize the market by creating a first time home buyers tax credit, increasing Fannie Mae and Freddie Mac loan limits, and by subsidizing interest rate buy downs with fixed low interest rates for qualified home buyer's. These measures are expected to have a signiifcant impact on the US housing markets.
As inventory decreases home prices are expected to stabilize. Whether the US market will have a sharp or modest rebound will take some time yet to tell as we watch many factors, such as mortgage rates, and what effect the stimulus package introduced by the government has on the markets. Though signs of stabilization is positive news and a step in the right direction, the approximatley 12-million people still dealing with sub-prime mortage problems on their homes still exists and will likely result in an increase in foreclsures well into 2009.
