Americans Believe Housing Recovery Wont Happen Until 2014
A survey conducted by Trulia and RealtyTrac found that a majority of American adults believe a housing recovery will not occur until 2014 or later.
Out of the 2,018 participants in the April survey, 54% speculated that the market is going to continue to struggle for at least another three years. In the six months ago, only 34% thought it would take until 2014 for a turn around to occur.
Last November 42% believed the market would have already begun to turn around or recover by 2012. Presently, only 23% think this is likely to happen.
“Most Americans overestimated how quickly the housing market would bounce back, but when it does, it will likely be a long and gradual process,” said Pete Flint, co-founder and CEO of Trulia. “On the flip side, mortgage rates won’t stay low forever and even if home prices continue to fall for a bit, now is still a good time to enter the housing market.”
Flint said it is currently more affordable to buy than rent a two-bedroom home in 78% of the major cities.
Despite concerns about hidden costs, a risky buying process and loss of home value, 56% of renters, 47% of people who currently own a home, are specifically interested in buying a foreclosure or bank-owned property.
Potential homebuyers have plenty of inventory to choose from, as there are over 900,000 REO properties currently on the bank’s books. Of those, less than 30% are actively being listed for sale.
At the same time, there are another 1.2 million properties in some stage of foreclosure, according to RealtyTrac. About 20% of foreclosed homes are listed for sale and the majority of those when they sell are sold by short sale. Additionally, there are another four million properties entering some stage of delinquency, not yet in foreclosure but many of them on the way there.
“Even if the banks were not to foreclose on a single property this year, we have nearly a two-year supply of REOs to go through before we exhaust the current inventory,” said Rick Sharga, senior vice president of RealtyTrac. “Potential for foreclosure activity will not begin to drop off next year, but…stay at very high levels through 2012 and into 2013. This means we will continue to have a huge inventory of distressed properties—bank properties—to sell off in 2013 and maybe into 2014.”
The survey said that potential buyers expect to pay 38% less for a foreclosed home than a similar property not in foreclosure. By renting a foreclosed home, 39% of buyers anticipated a discount of 50% or more. RealtyTrac said the average discount for REO homes is 36%.
“Demand remains weak, loans are increasingly difficult to qualify for, and the shadow inventory of several million distressed properties is weighing down the market. All of these things need to improve before housing can recover,” Sharga said.
Flint said he estimates it will take another 18 months for home prices to stabilize, which is a major step for any recover in the housing market.
“Even with mortgage rates still below 5%, today’s market conditions have made consumers more skeptical when the housing market will improve, rather than sparking an urgency in buying a home,” Flint said. “I expect the rest of 2011 to continue to be volatile for real estate.”