Tuesday, July 31, 2012

MARKET TRENDS: Real Estate Outlook: Will Recovery Continue?

The economy has been making strides towards recovery, but are these steps enough to ramp up both the housing and labor market?  

According to Bernanke, economic activity slowed during the first half of this year. This came after a 2.5 percent annual rate of GDP growth for 2011. Additionally, while the unemployment rate has fallen over the last year. "after running at nearly 200,000 per month during the fourth and first quarters, the average increase in payroll employment shrank to 75,000 per month during the second quarter."  
Federal Reserve Chairman Ben Bernanke reports there are two risk factors that could cripple a recovery. The first is the euro-area fiscal and banking crisis; the second is the U.S. fiscal situation.  

Housing has seen modest improvement, including rising pending and existing home sales in some regions. This growth is thanks in part to historically low interest rates. Buyers are always returning to the market to take advantage of low prices.

Bernanke says, "Construction has increased, especially in the multifamily sector. Still, a number of factors continue to impede progress in the housing market."

Builder confidence has responded and for the market of newly built, single-family homes, it has risen by the largest one-month gain in nearly a decade. 

The National Association of Home Builders (NAHB) reported on this trend in the their latest HMI survey. "Combined with the upward movement we’ve seen in other key housing indicators over
the past six months, this report adds to the growing acknowledgement that housing - though still in a fragile stage of recovery - is returning to its more traditional role of leading the economy out of recession," noted NAHB Chief Economist David Crowe. "This is particularly encouraging at a time when other parts of the economy have begun to show softness, and is all the more reason that the challenges constraining housing’s recovery - namely overly tight lending conditions, poor appraisals and the flow of distressed properties onto the market – need to be resolved."  

"Builder confidence increased by solid margins in every region of the country in July as views of current sales conditions, prospects for future sales and traffic of prospective buyers all improved," said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. "This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable."


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