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President’s Corner Realtors anxious to find new normal in this year’s dismal market

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Kerry Suess

Posted: Friday, October 7, 2011 2:13 pm | Updated: 2:14 pm, Fri Oct 7, 2011.

Liz Enochs recently wrote on www.housingwire.com that the U.S. housing market will hit bottom this year and remain flat until 2014, when it will start to slowly recover, according to Rick Sharga, an executive vice president with Carrington Mortgage Holdings. “We’re looking at a catfish recovery,” he told attendees at the Asian Real Estate Association of America conference in San Francisco Friday, saying the market will bump along the bottom for some time before starting to revive.

More than a million foreclosure actions that should have taken place this year have not yet moved forward, and that delay pushes a resolution of the housing market’s problems into next year and beyond, he said, citing data from RealtyTrac, where Sharga served as a senior vice president until this week. “We can’t expect to see home price appreciation until we work through these distressed assets,” he said.

Since 2005, there’s only been one quarter in which U.S. banks have sold more properties than they’ve taken back through foreclosure, leaving a huge overhang of real estate-owned assets that need to be cleared out. Banks hold about 800,000 REOs, and three-quarters of those are not listed for sale, said Sharga. Another 800,000 homes are in foreclosure and 3.5 million loans are delinquent. This “shadow inventory” will slow down a housing market recovery, he said, as monthly foreclosure numbers will remain elevated through 2012 and REO inventories will stay high through 2013.

Even with the continuing distress in the housing market, the country is not likely to enter a double-dip recession, said Eugenio Aleman, a director and senior economist at Wells Fargo & Co (WFC: 23.57 -2.28 percent). Although U.S. workers have suffered as the nation has lost 9 million jobs over a two-year period, the manufacturing and service sectors are expanding, he noted. “The rest of the economy is not booming, but it’s doing fine,” said Aleman. Wells Fargo is projecting that the U.S. economy will expand over the next few years, but at anemic rates: 1.6 percent this year, 1.4 percent in 2012 and 1.9 percent in 2013. “We are standing firm,” said Aleman of Wells Fargo’s economic forecast. “We are not going to go into a recession.”

Celia Chen, senior director at Moody’s Analytics in a research note. “As 2011 began, the recovery appeared healthy and ready to turn into a self-sustaining expansion. Job growth was strong, unemployment was falling, and income and consumer spending were accelerating,” Chen said. “Today, the economy is struggling to avoid another recession. “Recent housing indicators remained stable over the last three months. Housing starts averaged 590,000 units, house prices were flat, according to the National Association of Realtors and CoreLogic. But all data were down from last year and should only show minimal gains by the end of 2011.

Chen expects existing home sales will reach a 5.3 million annualized pace, and housing starts will touch 640,000. Next year, she said sales should reach a 6.5 million pace and housing starts could hit 1 million. Of the bankers surveyed by analysts at the consumer credit firm FICO and the Professional Risk Managers International Association more than half do not expect home prices to climb back to 2007 levels before 2020.

“Have we finally hit rock bottom? That’s hard to say, but according to our survey, it’ll be quite some time before prices fully recover. The fact is that the market needs help to clear the backlog of distressed properties,” researchers said. “We are in no man’s land right now.” The FICO and PRMIA surveyors agreed. “Something bold has to happen – either an acceleration of foreclosures that will force prices down to clear the market, or the adoption of aggressive policies that encourage the resetting of loan terms, such as the proposed expansion of the number of homeowners that qualify for refinancing,” they said.

I know most of us Realtors are anxious to find a new normal in Real Estate. I think buyers and sellers would prefer to have some stability in the market as well. I would hate to see the flooding of the markets with foreclosed homes. Yes, it would cause prices to again drop and would clear out the distressed properties over time. It would also severely damage homeowners who have equity with their loss in value. It’s also not extremely fair to allow all troubled homeowners to refinance to lower, more affordable payments. How fair is that to the millions who have already lost their home? For personal answers to your questions contact a Realtor.

If you have any ideas or comments contact Kerry Suess at larpres2011@yahoo.com.

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You have done the hard part in the home-buying process and chosen a lender and a real estate agent to work with. You have also gone out and found the home of your dreams! Best of all, your team has done a great job of negotiating the best deal for you.

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