The housing market keeps showing signs of life. However, another round of bad news that brings the recovery to a halt. The good news is recent data released for the first quarter of 2012, and some astounding figures for May, are showing a housing rebound that has little bad news attached.
During May, median asking price for a home was $190,000. This is up $7,000 from just the previous month, and an 8.2 percent increase over the previous year. This is terrific news for the housing market. It shows that regardless of the amount of distressed properties on, or entering, the market, sales prices are starting to grow.
There is a smaller inventory of distressed properties. Shadow inventory properties are distressed properties, which are either seriously delinquent or in the foreclosure process. These properties are not currently listed as available on the market. Many housing market analysts believe that the shadow inventory can drive down home values and cause a secondary crash. The great news is there are fewer homes in this sector of the market than at first believed.
It is anticipated that there are only 1.5 million shadow inventory properties, showing a four-month supply. It was first believed there were over 2 million properties in this category, leading to over a six-month supply. This simple decrease will have many positive effects on the market.
Foreclosures are increasing as anticipated. Starting in November 2010, many banks stopped foreclosing on properties due to the robo-signing scandal. Until February of 2012, these lenders have been keeping these distressed properties on the “back burner” until a settlement was reached with the government.
Part of that settlement was a standardized procedure for foreclosures. Banks now have guidelines to follow to ensure that any property that does reach the foreclosure stage is processed correctly. In addition, there have been many concessions made to encourage mortgage modifications and increase the possibility of short selling a property to avoid foreclosure altogether. All of these changes are very beneficial to the housing market and home values.
Now, banks are moving forward with foreclosures, clearing up the backlog and removing worry from the market as to how many properties are going to come to market. Once this backlog is completed, the market should return to normal.
Borrowers have more equity and less debt. Nearly 50 percent of home owners who are refinancing to lower interest rate mortgages are paying down debt and reducing their mortgage burden. Of this 50 percent, nearly all of the applicants applied for shorter term loans with higher payments in an effort to become debt free. Mortgage debt has decreased by seven percent in the last five years.
Overall, the state of the housing market is looking very good. Experts believe that, except for any unforeseen events, the housing market should be in full recovery mode for the remainder of the year. It is anticipated that 2013 will even see the first real rise in home values since the crash in the housing market.