Despite rising mortgage rates, still-depressed home prices, and the expiry of the home buyer tax credits, the housing recovery won't stall.
If you are a "glass is half-empty type" when it comes to the future of real estate-and judging from my mail bag, a significant percentage of you are-there is a lot to hang your hat on these days.
There is no doubt that the federal tax credit helped, especially for the first-time homebuyers, who often need that extra equity boost to qualify for their home. But I don't think removing the credit can stop the momentum generated from other factors that point to a continuing-if somewhat slow-recovery.
Macro Reasons for Optimism
What other factors? For example, even with interest rates up more than a half of a percentage point above the recent low, home sales volume was up 6.8 percent nationwide from February to March, and up 16.1 percent over last March. Those are both good numbers and very good trends. Notwithstanding that banks are coming off their winter hiatus and dumping more homes on the market this spring, inventories remain near 8 percent. This is a half-point lower than February and one-and-a-half points lower than last March. More good signs.
There has been good macro news as well. It appears that unemployment has peaked and even started a slight reversal. The Dow Jones industrial average recently passed through 11,000, around 85 percent above its year-ago low of 6,500. Add decent news from such other critical sectors as retail sales and an increase in manufacturing inventories, and there's reason for optimism.
Then there is the housing affordability index, the number designed to track how affordable the average home is at any given moment. It does this by dividing the average monthly household income by the average income a family would need to qualify for a mortgage. At 176, it is still very attractive, relative to its lows a couple years ago.
While many are still disappointed that home values remain depressed, they seemed to have held despite the foreclosure dumping. Coupled with average wages being up, this remains an incredibly attractive time to buy or trade up.
Uptrend Will Outlive Tax Credits
Then there's the fact that interest rates are still hovering near historical lows. It is certainly worth the time and effort it takes to get a loan.
HWA is optimistic that real estate sales will continue to trend up, even without the tax credits.
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