While existing home sales were better than expected by most in the industry—up 7.6% in August—the numbers are still the weakest seen in 10 years, and housing experts do not expect a speedy recovery.
The second quarter of this year continued to see declines in online mortgage business. According to numbers compiled by this publication, online originations in the second quarter of 2010 dropped by 63% overall compared to the second quarter of 2009. Online originations during the same time period among the top 10 producers also fell by 63%.
John Ryding, founder of RDQ Economics, told CNBC the worst is behind the housing industry in terms of “the decline in sales, decline in construction and decline in prices.”
“But that doesn’t mean to say we’re going to have much of a recovery,” he said in a Sept. 23 interview.
“We’re at extremely low levels. Housing starts represent about half a percent of the total outstanding stock and some of that housing stock is being replaced. That would sound like good news. The problem is there’s still a lot of inventory of unsold homes or homes that haven’t yet gone into the foreclosure process or held off the market, that would come in new supply. That supply will hang over the market and dampen any kind of recovery. I think we’re going to flatline for a couple of years here.”
Richard DeKaser, president of Woodley Park Research, says consumers are looking at the own vs. rent decision in a more favorable way, and he projects an improvement in available credit.
“Conditions amongst the lenders are dramatically improved. Profits are up, capital is at the highest level since the 1930s. If you look at the Fed’s most recent senior loan officer’s survey, the July results showed for the first time, an easing of credit conditions for mortgages. I don’t want to exaggerate the case. It’s very modest. I don’t see 'easy money’ any time soon. I see less 'tight’ money as we go through the next 12 months.”
According to Robert Andrews, senior analyst with IBISWorld, home prices are forecasted to bottom out in the third quarter of 2010, as the expiration of the homebuyer tax credit finally allows the market to reach its bottom.
“The expectation of a double dip in home prices is also frightening for the economy, as anemic demand continues to hamper real GDP growth,” he said.
“If weak demand continues, the prospect of a double-dip recession may come to fruition, as residential investment remains well below normal recovery growth levels.”
He believes the housing market needs to find “its true bottom” before things can finally turn around.
“At the same time, house prices are expected to face continued pressure from elevated unemployment rates, record delinquencies and tight lending standards. As a result, there will be no quick rebound to prebubble housing values, as prices are expected to revert to historic growth patterns over the next few years,” said Andrews.
