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Housing Has Bounced Back, but Capitol Hill Holds the Key to a Sustained Recovery

Friday, May 3rd, 2013

Houseforsale

The following article was reposted from Knowledge@Wharton

Published: April 30, 2013 in Knowledge@Wharton

The U.S. residential real estate industry is showing signs of a recovery. Demand for homes is growing stronger, driven by historically low interest rates and government subsidies. Job growth would, of course, accelerate that rebound. However, for a sustained recovery, housing supply must increase with both new construction and regulatory reforms that could bring to market homes that are “under water,” or those whose market prices are lower than their outstanding loans. Those were the main highlights from a panel discussion on real estate industry trends at the Wharton Economic Summit 2013, held in March in New York City.

A crucial element of the legislative reforms is to find ways to shield the federal government from home financing losses, the panelists said. The government ended up becoming the country’s biggest home financier after the 2008 housing collapse, when it bailed out secondary mortgage finance agencies Fannie Mae and Freddie Mac at an estimated taxpayer cost of up to $360 billion. Bipartisan political consensus holds the key to the reforms, panelists stressed.

The panel included Jeff Blau, CEO of Related Companies, a New York City-based real estate development firm; Jonathan D. Gray, global head of real estate at New York City-based financial advisory firm Blackstone; Jim Millstein, chairman and CEO of New York City-based financial advisory firm Millstein & Co.; and Richard A. Smith, chairman, CEO and president of Realogy Holdings Corp., a New Jersey-based real estate franchising and services company. Joseph Gyourko, Wharton professor of real estate, moderated the discussion.

Unexpected Recovery

“The metrics certainly indicate a much stronger interest in residential housing than it seemed in the previous six years,” said Smith. His firm Realogy operates in all 50 U.S. states and 102 countries and has a 26% market share of the U.S. housing market in sales volume. The recovery has gathered pace since the first quarter of 2012 and is “completely unexpected,” he added.

Consequently, home prices have strengthened and the overhang of unsold homes is bottoming out, but something “much more dramatic” is occurring, according to Smith. “We literally have markets where we have no supply, no inventory,” he said, citing New York City as an example of this phenomenon. He saw that across the country — a week’s supply of homes in San Francisco, no inventory to sell in Miami and an outpouring of open houses “in every market” where Realogy operates. “We feel very strongly that this is a strong recovery and it is sustainable.” In Phoenix, home prices are up 25% and they have risen in the “very high double-digit percentages” in Southern California, added Blackstone’s Gray.

Smith said the housing recovery is occurring despite impediments. He cited two issues relating to the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. One is a decision on what constitutes a “qualified residential mortgage,” or QRM, because that would set the criteria for the down payment for home loans that underwriters require. A related second issue is whether a decision about QRM could encourage developers to resume homebuilding.

Increased housing inventory is critical for a sustained recovery, Smith argued. A resolution to the QRM issue could release some of the 10.8 million homes that are under water, he explained. “If we do not have the increase in inventory, then we will still have a recovery, [but] that will be anemic.”

Since 2009, underwriters have been wary of risk and are lending only to “the highest possible standard” of borrower creditworthiness, Smith noted. He called for a speedy resolution of the matter and hoped the new debt-to-income criteria would be less onerous than people fear they might be. He clarified that he did not expect underwriting standards to become more lax. He only wanted to get back to the “pre-bubble” days, when underwriters required credit scores about 100 basis points lower than current expectations of about 750, he said. (Credit rating agencies award scores from 300 to 850.)

Follow this link to read the rest of the article:  http://knowledge.wharton.upenn.edu/article.cfm?articleid=3243

 

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Posted in Economics, Government Policy, Industry News, Real Estate Trends, Residential Real Estate | No Comments »

Five Real Estate Tips from Warren Buffet

Friday, April 26th, 2013

home-for-sale

Spring is finally here and the housing market appears to be making a comeback.  With prices that are still historically low and mortgage rates in the 3% to 4% range, owning a home has never been more affordable.  That being said, there are still some basic principles that potential home buyers should keep in mind.  In the articel below Tara-Nicholle Nelson list 5 real estate buying tips offered by Warren Buffett.

Article by Tara-Nicholle Nelson of Daily Finance

Billionaire. Oracle of Omaha. The most successful investor in the world. All of these are used frequently — and accurately — to describe Warren Buffett, Chairman of Berkshire Hathaway, a holding company with upward of $130 million. Though his stock in trade is, well, stock and trade, over the years, Buffett has actually spun quite a bit of wisdom on real estate, and much of the advice he has given to investors in traded assets would also stand the average American homeowner in good stead.

Looking for some wisdom on the best approach to owning a home? Here’s a sampling of real estate tips from Buffett, right, the third richest human being on the planet.

1. The Basic Premise of Home Ownership — That Homes Increase In Value Over Time — Is Sound

Last spring, the Congressional Financial Crisis Inquiry Commission called Buffett in for an interview. He was asked to explain some of his bubble-era investment decisions, as well as to give his take on what in the heck had happened to the economy. In the process, Buffett expressed his belief that the housing bubble was inflated by an irrational, widespread belief that home prices would only ever go up — an extreme corruption of a generally valid premise. “It’s a totally sound premise that houses will become worth more over time because the dollar becomes worth less,” Buffett declared.

The sound premise, Buffett explained, got distorted and eventually caused the housing crisis when Americans started buying multiple homes to cash in on what they assumed was guaranteed appreciation, taking out “liar’s loans,” buying homes with no down payment and with unaffordable monthly payments — and lenders let them — all because of the assumption that prices could never go down.

Clearly, this assumption was wrong. As Buffett said in an earlier shareholder’s letter: “A pin lies in wait for every bubble.”

2. Buy Low (And Now Would Be a Good Time for That)

Buffett writes a letter to Berkshire Hathaway’s shareholders every year that is chock-full of his review of the company’s fortunes (literally) over the preceding year, his analysis of the stock market and the economy in general, and his smart, plain English tips on life and money and on life.

In last month’s annual shareholder letter, Buffett addressed the industry-leading 2010 performance of one of his company’s holdings, which sells and finances manufactured homes. During that discussion, the money maven declared that now would be a sensible time to buy a home, in light of record-high affordability: “Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.”

And Buffett didn’t stop there. He pointed out his own tenure as a homeowner as an example. “All things considered, the third-best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks,” he wrote. Then, to clarify for the readers who’d want to know what numbers one and two were, Buffett elaborated: “The two best investments were wedding rings.”

3. But Don’t Wait Too Long To Take Advantage of Low Prices

Buffett wrote a 2008 Op-Ed in the New York Times, explaining that buying while prices are low is stressful, because economic markets are volatile and impossible to predict in the short term, even for him. So, when conditions make an investment — in stocks or in a home — particularly advantageous, Buffett says not to hesitate too long. Painting a vivid verbal image to illustrate the likelihood that market prices “will move higher, perhaps substantially so, well before either sentiment or the economy turns up,” Buffett warned: “if you wait for the robins, Spring will be over.”

(more…)

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Posted in Economics, Industry News, Real Estate Trends, Residential Real Estate, Twin Cities Real Estate, Uncategorized | No Comments »

AIA: Architecture Billings Index increases, Strongest Growth since 2007

Wednesday, April 24th, 2013

In another sign of improvement in commercial real estate the Calculated Risk blog in a recent posting notes a continuing increase in the AIA Architecture Billings Index.  When architects get busier that usually indicates an increase in new construction is not far behind.

Arch. BillingsNote: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Architecture Billings Index Continues to Improve at a Healthy Pace

With increasing demand for design services, the Architecture Billings Index (ABI) is continuing to strengthen. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 54.9, up slightly from a mark of 54.2 in January. This score reflects a strong increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 64.8, higher than the reading of 63.2 the previous month – and its highest mark since January 2007.

“Conditions have been strengthening in all regions and construction sectors for the last several months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Still, we also continue to hear a mix of business conditions in the marketplace as this hesitant recovery continues to unfold.”

• Regional averages: Northeast (56.7), Midwest (54.7), West (54.7), South (52.7)

• Sector index breakdown: multi-family residential (60.9), mixed practice (56.9), commercial / industrial (53.3), institutional (50.7)
emphasis added

This graph shows the Architecture Billings Index since 1996. The index was at 54.9 in February, up from 54.2 in January. Anything above 50 indicates expansion in demand for architects’ services.

Every building sector is now expanding and new project inquiries are strongly positive (highest since January 2007). Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an “approximate nine to twelve month lag time between architecture billings and construction spending” on non-residential construction.  This index has been positive for seven consecutive months and suggests some increase in CRE investment in the second half of 2013.

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Posted in Commercial Real Estate, Development, Economics, Investment Real Estate, Multifamily, Office Real Estate, Real Estate Trends, Retail Real Estate | No Comments »

The “A” Lot Shortage and the Buying Frenzy Intensify: What’s a Builder to Do?

Sunday, April 21st, 2013

The historically low inventories of homes for sale is creating new opportunities for home builders. The number of housing starts has continued to increase when compared to the last several years. While the number of housing starts is still considerably below the levels seen in the early to mid 2000′s, the increase in activity is creating an acute shortage of build-able lots in good locations. This shortage is putting an upward pressure on the price of quality lots. Prices in some areas are nearing pre-crash levels. The article below by Brad Hunter illustrates what is happening in other markets around the country. Home builders in the Twin Cities are saying they are seeing the same trend in our market as well.

house construction

Posted in National Housing Market   Written by Brad Hunter

As the lot feeding frenzy builds, more and more builders are scratching their heads at the prices they are being asked to pay for homesites.  Builders have a strong motivation to increase their community counts, but they are having to pay near-peak prices for lots in order to do so.  Decisions made by builders in the next six to twelve months will be absolutely critical to their ongoing financial health.

Last fall, we conducted a special nationwide study of all the public homebuilders’ lot positions, and we found that most of the public homebuilders had seen an erosion of their Vacant Developed Lot count (VDL).  In that special study, we looked at the VDL’s that were associated with the builders, whether owned or optioned, for all of their communities within our footprint.  We found that most builders saw a reduction in their lot inventory, but many of them started going longer on lots at that time.

We discovered the following changes in lot count, year over year:

Meritage’s lot inventory was down 22.4% from mid-2011 through mid 2012.

Lennar was down 18.2%

Standard Pacific, known as a land-LONG builder, was only down 4.3%.

Toll was up.

MDC was down 21.7%.

Beazer was down 20.2%

As a group, the publics were down in lot supply by 15.9% year over year.

Since this time, many builders who found a need to be LONGer on land have made significant progress in shoring up their lot positions.

The problem that has arisen is that they have had to buy at much higher prices than prevailed 12 months earlier.  In many markets, lot prices have jumped by 50% in a year.

The rebound in Phoenix home price and in lot prices is well known.  What is less well known is that NON-bubble markets like Houston and Dallas have also seen this kind of rebound.  In Texas, Fort Bend, Harris and Collin Counties have experienced a noticeable drop in available  supply of good lots relative to demand.  Here is a great case study:  In The Woodlands, in Houston, there has been a DOUBLING of lot prices in the past 12 months.  Lots in that community now run as high as $2,700 per front foot.

Even Atlanta, yes, badly over-developed and much-maligned ATLANTA, has seen a 30% increase in lot prices in the most desired neighborhoods.  That reflects the fact that the only lot transactions that are happening are in the “A” locations like South Forsyth.  We forecast that in another 18 months, there will be lot SHORTAGES in that submarket.  Many builders are jumping into Atlanta now, precisely because there are still some affordable lots there.

Lot prices in Naples/Ft. Myers have gone up 50%, and raw land values have doubled (and in some submarkets TRIPLED).  Of course, these percentage changes are based on low starting numbers, but the point remains that it costs a lot more to stay in the business in 2013 than it did in 2012.

(more…)

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Posted in Development, Economics, Industry News, Real Estate Trends, Residential Real Estate | No Comments »

Here are the “Missing” Construction Jobs

Wednesday, February 13th, 2013

I recently found an interesting article about construction jobs and the recovering housing market written by Trulia chief economist Jed Kolko, check it out below:

Construction jobs are a big part of how housing recovery lifts the broader economy. But the construction rebound, so far, appears to be jobless. “Residential construction” jobs, as reported by BLS, were up just 1% in December 2012 from their lowest level since the housing bubble burst – even though new home starts in December 2012 were twice as high as their low point in 2009. Overlaying residential construction employment (monthly, in thousands, left axis) and construction starts (monthly, in thousands, right axis) data suggests a jobless housing recovery, with jobs struggling to turn around even as starts climbed sharply in 2012:

Who is building all these new homes? If starts are now twice their lowest level, why aren’t residential building jobs also twice their lowest level, instead of up just 1%? The answer: this is the wrong way to look at construction jobs. It turns out that construction employment is approximately where it should be for the current level of construction activity. Here are three reasons why:

“Starts” aren’t the right measure of current construction activity. Units “under construction” is more relevant – especially now. The amount of construction activity this month depends not only on this month’s construction starts but also on construction starts in previous months. That’s because single-family construction takes 4-6 months between start and completion, and multi-unit-building construction takes 10-14 months, on average. Therefore, construction starts indicate what will happen to construction activity in the coming months – not necessarily where it is today. And, in this recovery, multi-unit buildings are an unusually high share of overall construction activity, so the typical new unit is under construction for longer, making starts an even-worse-than-usual proxy for current construction activity. Instead of starts, units “under construction” – also reported monthly by the Census – is the right measure of construction activity to compare with jobs. This changes the picture dramatically: while monthly starts in December 2012 were up 100% (that is, have doubled) since the bottom, monthly units under construction were up 32% from the bottom.

The “residential building” jobs category understates growth in residential construction jobs. The BLS “residential building” category covers general contractors and construction management firms but not subcontractors, which are covered under another category the BLS tracks, “residential specialty trade contractors.” Importantly, residential construction jobs have been shifting steadily from general contractors to specialty trade contractors throughout the boom, bust, and recovery, so the narrower “residential building construction” category understates recent growth in construction jobs. “Residential building” jobs in December 2012 were up just 1% from the bottom, while “residential specialty trade contractor” jobs were up 4%. The combined series is up 3% from the bottom. Of course, some construction workers might not be officially counted if they’re off the books, and others might work on both residential and non-residential projects and not fit neatly into one reporting category. Still, looking at both the “residential building” and “residential specialty trade contractors” gives a clearer picture than looking only at “residential building.”

Follow this link to read the entire article: http://www.calculatedriskblog.com/2013/01/kolko-here-are-missing-construction-jobs.html

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Posted in Development, Economics, Industry News, Real Estate Trends, Residential Real Estate | 1 Comment »

UST Team to Compete in the Gerald D. Hines / ULI Student Urban Design Competition

Thursday, February 7th, 2013

photo source: Minnesota Vikings

The 2013 Hines Competition is underway!

One hundred sixty teams from 70 universities in the United States and Canada are currently developing solutions for a site in Minneapolis’s Downtown East neighborhood, near the site of the new Minnesota Vikings stadium

The ULI/Gerald D. Hines Student Urban Design Competition, now in its 11th year, is an urban design and development challenge for graduate students. The Hines Competition challenges multidisciplinary student teams to devise a comprehensive development program for a real, large-scale site. Teams of five students representing at least three disciplines have two weeks to develop solutions that include drawings, site plans, tables, and market-feasible financial data.

The University of St Thomas team members are  Thomas McElroy, full time MBA student; Thomas Strohm, MSRE student, Michael Richardson, Master of Urban and Regional Planning  student at the University of Minnesota; Amber Hill, Master of Landscape Architecture student at the University of Minnesota; and John Briel, Master of Urban and Regional Planning  student at the University of Minnesota.

This is an ideas competition; there is no expectation that any of the submitted schemes will be applied to the site. The winning team will receive $50,000 and the finalist teams $10,000 each.

The ULI/Gerald D. Hines Student Urban Design Competition is part of the Institute’s ongoing effort to raise interest among young people in creating better communities, improving development patterns, and increasing awareness of the need for multidisciplinary solutions to development and design challenges. This competition is an ideas competition; there is no expectation that any of the submitted schemes will be applied to the site. The winning team will receive $50,000 and the finalist teams $10,000 each. Winners that will advance to the next round of the competition will be announced by the end of February.

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Posted in Commercial Real Estate, Contest, Development, Economics, Industry News, Real Estate Trends, Residential Real Estate, Retail Real Estate, Think Outside The Box, Urban Planning, UST Program News, UST Real Estate in the News | No Comments »

23rd Annual Business Valuation Conference

Tuesday, January 15th, 2013

The 23rd Annual Business Valuation Conference will be held Wednesday, February 6. This conference covers topics of interest to attorneys, accountants, business brokers, business owners, commercial real estate brokers, lenders, investment bankers, appraisers and others who regularly encounter business valuation issues.  It is held at the University of St. Thomas campus in downtown Minneapolis and is presented/sponsored by The UST Shenehon Center for Real Estate, NCCIBA, NACVA, ASA.

Topics featured at the conference include:UST RE conference

  • Economic Update
  • The Layman’s Use of Regression Analysis
  • Identifying Metrics and Calculating Value in Excel
  • Basics of a Real Estate Appraisal
  • Avoiding the Pitfalls When Valuing Machinery & Equipment
  • Understanding Minimum Compensation in Eminent Domain
  • When is it Time to Call in the Experts?
  • Current Court Decisions

This conference has been approved for eight hours of real estate and appraiser continuing education through the Minnesota Department of Commerce.

Register here.

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Posted in Appraisal, Business Valuation, Commercial Real Estate, Economics, Real Estate Programs, Real Estate Trends, Uncategorized, Upcoming Industry Events, Upcoming UST Events | No Comments »

St. Thomas real estate analysis: 2012 will be seen as the year the housing market finally hit bottom and began its recovery

Friday, January 11th, 2013

mortgages

 December’s median prices continue to show gains over last year; momentum is expected to continue into 2013.

With data from December now in, history will record that 2012 was the year the Twin Cities housing market finally bottomed out and began to recover.

 The market’s low point came in February 2012. Since then, the median sale prices recorded in 2012 have exceeded the 2011 levels every month, according to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.

 Each month the center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance).

 The overall median sale price for all categories of homes in the Twin Cities peaked at $238,000 more than six years ago, in June 2006. That overall median price hit its low point in February 2012 at $138,250.

 Herb Tousley, director of real estate programs at the university, said housing data from December “continues to exhibit many of the positive market trends that have been observed for much of 2012.”

 The median sale price in December 2012 for all categories of homes was $168,404, a gain of 16.2 percent over December 2011 when it was $145,000.

 The median price of a nondistressed home in the Twin Cities peaked in June 2006 at $239,900 and reached its low point in February 2012 at $180,000. Since last February the median price for these traditional home sales increased steadily until peaking in August 2012 at $219,700.  The median price then began its seasonal, fourth-quarter decline, ending at $208,000 in December 2012. That was a 9.2 percent increase over December 2011.

 More details about the market can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

(more…)

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Posted in Economics, Industry News, Real Estate Trends, Residential Real Estate, Residential Real Estate Index | No Comments »

St. Paul Union Depot: Gateway to what’s ahead

Thursday, December 13th, 2012

This post was written by Dan Jackson, a 2012 UST MBA graduate.

So I have a confession to make about myself that I have only shared with a few people (apparently this post is most appropriate to make it known to all)…I have always had a life-long fascination (and somewhat of an obsession) with trains.  This fascination was so strong, that one of my dream jobs as a child was to be a train conductor or train engineer.  Ever since I can remember, I always became excited when I was in the car with my parents and we would come to a train crossing right as a train passed through the intersection.  Instead of getting bored and irritated with the amount of time it took for the train to pass, I would get excited and would count the number of cars, imagining myself on the train taking me to its next destination.  I still get excited at railroad crossings today if a train passes by!

Photo credit: St. Paul Union Depot

I also remember my first train set that I received at Christmas.  I would frequently set this up in our basement and spend countless hours watching the train progress through its large figure-eight track system.  The train had a functioning headlight, and whistle!

Moving forward into my adult life, the fascination with trains continues.  As you can imagine, I was super excited when the Hiawatha light-rail line opened for business and I was also elated when I heard about the construction and opening of one of the first commuter rail systems for Minnesota, the Northstar Commuter Rail.   Over the years I’ve come to understand that this love for trains contributes to my overall excitement about the New Urbanism concept (which I’ve discussed in previous posts), as well as place-making principles.  All of these points came together once again in an article in Finance and Commerce that discussed the recent restoration and grand re-opening of the St. Paul Union Depot.  The article talks about the complexities and surprises that were encountered during the restoration of the building that first opened in 1923.  The building saw its last passenger train in 1971, but still housed a restaurant and operated as a meeting space for weddings, parties and other business functions.  The restoration and re-opening of this space allows me to reminisce about the days when the Union Depot was the gateway for many people coming into the Twin Cities area, the first stop in the cities for many who were accustomed to travelling via train at the time.

Today, the Union Depot will once again serve as a transit hub to passenger trains, as well as light-rail transit and bus service.  In addition to serving as a connection point for many metro transit busses and Jefferson Bus Lines, the Union Depot will serve Amtrak trains, as well as be the final (or beginning – depending on which way you are headed) stop for the Central Corridor light rail system.

While the re-opening of the Union Depot allows me to indulge myself in the variety of possible transit options that will be available here in the Twin Cities (especially options via train), I want to focus more on what a transit station itself means in terms of development opportunities for the Twin Cities area.   I reflect on an assignment that I completed during one of my classes at St. Thomas, REAL 746: Real Estate Market Analysis and Feasibility.  The class focuses on the role of market analysis and feasibility studies in real estate decision making and valuation.  For the final project, we were to perform a market analysis for a particular site that we would like to see developed in the Twin Cities area.  Given the focus and direction of the course, I chose to look at the feasibility of a transit terminal station near Target Field in Minneapolis, home of the Minnesota Twins.  While the Union Depot is not located in Minneapolis, there were many elements that I focused on within my project for REAL 746 that relate well to the revival of the Union Depot as a transportation hub.  Listed below are just a few examples that I found through research that highlight the importance of a transit hub in the Twin Cities metro area. (more…)

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Posted in Economics, Industry News, Think Outside The Box, Urban Planning | No Comments »

Why the Housing Market Is Poised to Enter a ‘Virtuous Cycle’

Thursday, September 27th, 2012

As the good news for the housing market continues to accumulate more people are asking the question “Is this recovery for real?” As was noted in the most recent University of St Thomas Residential Real Estate Index Housing Report for August, median home prices in the Minneapolis / St. Paul market are not only continuing to increase, but they also continue to remain higher than last year’s median prices. The percentage of distressed sales has moderated and the average time it take to sell a house is decreasing. 

(Link to the report http://www.stthomas.edu/business/centers/shenehon/research/default.html/)

These trends are being reflected in most of the major markets around the country. What makes this recovery period different from some of the false starts we have had in the past? What are the factors that are driving these trends?  The article below was recently published in Knowledge@Wharton. It provides an interesting analysis of the state of the housing market today.

Published: September 26, 2012 in Knowledge@Wharton

By the less-demanding standards of the past few years, the latest housing figures, like many from recent months, look pretty good.

On September 25, the Standard & Poor’s Case-Shiller Home Price Index showed a 1.2% price gain in July compared to a year earlier. Prices have risen for three consecutive months. The National Association of Realtors (NAR) reported on September 26 that sales of existing homes had risen by 9.3% in August, compared to a year earlier, and that the median price of existing homes sold was up 9.5% over the past year. (NAR and Case-Shiller use different methodologies.)

For the 12 months ended in July, sales of newly constructed homes were up about 25%, though the total was still only about half of the 700,000 units considered healthy. Experts are especially impressed that prices of the least-expensive third of homes lead the gains, going up a full 1% between June and July. Those homes had received the worst drubbing in the recent housing market collapse.

Is this the start of the long-awaited and elusive housing recovery — one that would bring a stronger economy overall? Or is the market just taunting us as it bumps along the bottom, perhaps only to plunge again?

“It’s for real. This is absolutely for real,” says Susan Wachter, professor of real estate at Wharton. The market, she says, is poised to enter a “virtuous cycle” where positive trends will spur more positive trends. “This market recovery will continue,” she says, predicting that rising prices will prod potential buyers to buy before prices go up more. That demand will nudge prices up, drawing in even more buyers.

“I have been optimistic about this market for six months or a year,” she adds, noting that the latest data supports an analysis of the market she offered in a recent paper co-authored with Mark Zandi, chief economist and co-founder of Moody’s Economy.com, and Moody’s analysts Celia Chen and Cris DeRitis. The paper, “Assessing the Housing Threat and the Appropriate Response,” was prepared for a recent Pew Charitable Trusts conference titled, “Strategies for Revitalizing the Housing Sector.”

A Sense That Things Are Getting Better

Though the average home is still worth 30% less than at the peak of the bubble in 2006, from January through July, prices rose 5.9%, the strongest performance in seven years.

Read the rest of the article:  http://knowledge.wharton.upenn.edu/article.cfm?articleid=3085

 

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Posted in Economics, Industry News, Residential Real Estate | No Comments »

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