We’re in a business where it’s good to worry; if we didn’t worry, we might take on too much risk, to the detriment of our clients. But we recognize that not all of the economic news is bad these days.
So we note that housing prices are rising. At the least, this provides symbolic relief, as it was the bursting of the housing bubble that led to the 2008 financial meltdown. If housing prices just kept appreciating forever, all of those mortgage-backed securities would have deserved their high ratings and the meltdown could have been avoided.
Standard & Poor announced at the end of September that its Case-Shiller Home Prices Indices showed an annual gain of 1.2% in July, based on a 20-city composite. Optimism about housing prices has continued into October, helping to boost the stock market this week – even as many companies reported sub-par earnings.
In a webinar on Thursday, the National Association of Home Builders (NAHB) noted that the housing market is gaining strength because of:
- More home building, due to pent-up demand
- Rising consumer confidence
- Increasing builder confidence in all three segments of the industry — remodeling, multifamily and single-family construction
- Growing rental demand
However, NAHB Chief Economist David Crowe also expressed caution. He noted that home builders are finding it difficult to obtain production credit, many potential buyers are unable to obtain mortgage loans, many appraisals are inaccurate and there are still many homes either in foreclosure or with mortgages that are at least 90 days delinquent. There is also limited inventory in many markets.
So will the housing market achieve full recovery in time for next spring’s buying season? I wouldn’t bet the house on it. Continued improvement is likely, but full recovery is years away.