Thursday, June 13, 2013

Current Housing Recovery Only Temporary?

Despite recently rising home prices that suggest an improvement in the market, data from Radar Logic insists that the factors underlying the perceived financial recovery “will not lead to sustainable price gains.”  If Radar Logic is right, then its data will be important to understand the limitations of financial recovery and other issues facing the housing market in Illinois.
What is Radar Logic?
Radar Logic is a self-described technology-driven data and analytics business that provides “a daily ‘spot’ price for residential real estate in major U.S. metropolitan areas.”  It’s primarily known for producing “Radar Logic Daily Prices,” which provide information for the company’s monthly housing market reports.
Notably, Radar Logic also “provides the tools and support needed to power the Residential Property Index market.”  You may have heard of this index, which is trademarked as “RPX.”
Recent Data and Price Gains
According to an article in DSNews, the forces that are driving the housing market increase is only temporary.  In March, Radar Logic’s home price index “showed a 13.1 percent year-over-year again.”  The data points to a number of reasons that the ricing price trend won’t last, but the primary reason is that the market will soon become saturated with supply—again.    
In other words, we currently have rising prices and limited supply, which makes it look like financial recovery is in the works, but that limited supply is likely to lead back to the oversaturated market that defined the years of the real estate crash.
In April of 2013, there were approximately 1.9 millions single-family homes available for sale (a number that excludes condominiums and townhouses).  This may seem high, but it’s actually strikingly low compared to the number of houses on the market in July 2007, a point that represents the peak of the housing boom.  In fact, in July 2007, 3.4 million single-family homes were available for sale.
However, there are a number of factors at work that, according to Radar Logic, will lead to market saturation in coming months.  While we’ve been reading that there’s currently a limited supply of homes on the market, this is only a temporary issue.  And when it’s resolved, so to speak, financial recovery will stymie across the country.  The recent report points to some of the current supply constraints that will ease as prices continue to rise.  These include low and negative equity, seller psychology, and building activity.  
To begin with, homeowners with negative equity are now able to list their properties since prices are rising, and this will add to the overall supply in the market.  Seller psychology will play a big role as sellers begin listing their homes as a result of the rising price trends, thus oversaturating the market.  And finally, data from the Census Bureau shows that building activity “is picking up again,” with huge increases in building permit requests.
These factors, combined with the fact that “demand is not expected to last,” can mean a quick halt to financial recovery in Illinois and across the country.  In fact, “recent evidence actually suggests profitability in the single-family market is already disappearing.”  As a homeowner, it’s important to stay current with your mortgage payments and to know the trends in the real estate market if you’re considering selling your house.  If you have questions about real estate, homeownership, or avoiding foreclosure, an experienced foreclosure defense lawyer can discuss your options with you today.
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