by Gene Wunderlich
You’ve heard me complain before – get five housing experts in a room and you’ve got no fewer than nine theories about where the market is headed. Take for example a few headlines from a recent week:
Pace of U.S. home resales rises to eight-month high
WASHINGTON – U.S. home resales rose in June to their fastest pace in eight months, a signal that the housing market was pulling out of a slump. (Emphasis mine)
Economists Tamp Down Housing Expectations
A slower than anticipated first half has killed off any enthusiasm economists had for housing at the start of 2014, a survey published by the Wall Street Journal finds.
U.S. new home sales post biggest drop in almost a year
WASHINGTON/NEW YORK – Sales of new U.S. single-family homes fell sharply in June and the prior month’s data suffered the biggest downward revision ever, casting a cloud on the housing market recovery and helping to send homebuilder stocks lower.
U.S. home prices down in May, but consumer confidence strong
NEW YORK – U.S. single-family home prices fell unexpectedly in May, declining for the first time in more than two years in the latest signal of the wobbly state of the housing market.
That was just from one day the last week of July! One guy thinks we’re pulling out of the slump, one guy is tamping down expectations and the last guy thinks we’re wobbly. That guy is probably closest to the mark.
Wobbly probably sums up our market pretty accurately. On the one hand it looks kind of weak being consistently under last year’s tepid pace. On the other hand, prices continue to rise so homeowners regain equity in their homes. Back to the one hand, inventory is rising four times faster than demand, but on the other hand we’re still low on inventory and demand is staying fairly constant. On the one hand first time buyers and investors are leaving the market in droves and millenials aren’t even trying, on the other we’ve managed to replace many of those missing buyers with standard buyers and sellers just looking to move up after years of staying put. The last recovery wasn’t this wobbly – but then the government didn’t have their fingers in so much of our business back then either. Think there’s any relationship?
Speaking of government, don’t look for anything major to happen on the housing front anytime soon. Congress is on vacation right now so we can all breathe a sigh of relief. The PATH Act, which Realtors® heartily abhor, is probably dead and Dave Camp won’t even introduce his tax reform bill prior to his retirement – which is also good news. Your mortgage interest deduction is safe for this year at least.
The Johnson-Crapo Housing Finance Reform Bill is still alive in the Senate, and that’s good – we like parts of that. And Fannie & Freddie posted more profits in Q2 and paid the government another $5.6 billion. Fannie repaid its bail-out debt of $116 billion in Q4 2013 and as of the latest tally has generated about $15 billion in profit for the general fund this year. Freddie paid off its $71 billion tab in Q3 last year and generated a profit to the general fund of nearly $20 billion since then.
Hard to argue to shut them down when they’re doing this well – but a little reform might be in order. Beacon Economics is forecasting that in 2015 the U.S. economy will have the strongest growth since the start of the recovery, averaging 3% to 3.5% per quarter following slower growth in 2014. That should mean a definite end to the slump. Probably. Unless it’s not. I’m feeling wobbly.
Gene Wunderlich is the Government Affairs Director for Southwest Riverside County Association of Realtors. If you have questions on the market please contact me at GAD@srcar.org or to keep up with the latest legislative and real estate trends go to http://gadblog.srcar.org/.