Mixed Signals for Housing Market, Part 2

Yesterday I wrote about the negative signals coming from the housing market.  Those signals include the expectation that banks will repossess more than 1 million homes in 2012, news that housing prices ended 2011 at their lowest point since February 2003 and an amazing estimate that there are still more than 10 million homes with negative equity.  Today I will discuss reasons for optimism and the signs that some people say point to the beginning of a recovery.

We can’t have a recovery without buyers and if the pending home sales numbers from January are any indication it appears that buyers are coming back to the market.  According to the National Association of Realtors® their Pending Home Sales Index was at 97 in January.  This is the highest it has been since April 2010 when it reached 111.3 and the home buyer tax credit was still in effect.  A number of 100 is considered healthy.  While we haven’t reached that “healthy” level of pending sales yet, Home Depot could be a leading indicator of good news on the horizon.

For the quarter ending January 29th, Home Depot reported that their net income rose 32% exceeding Wall Street Estimates.  While it is tough to know exactly what prompted a jump in home repairs some analysts suggest the increased activity points to hopeful owners sprucing up their homes for the spring selling season.  Generally speaking, people won’t invest large chunks of money in their homes unless they feel they have equity and it is secure.  Maybe this bump in home improvement is just deferred maintenance but if people really are getting ready to willingly list their homes for sale that speaks volumes about how the market is perceived (in a good way).

Home builders also perceive the market to be improving and home owners getting ready to list their homes for sale gives builders even more reason for optimism.  Those owners have to move somewhere and builders think they have a good shot at convincing people to buy new homes.  For the last five months the Builders Sentiment Index has been on the rise, in January reaching its highest level since May 2007.  There is still a long way to go before construction of new homes will be at the level of a strong housing market but builders definitely seem to think there is reason for hope.

With all this hope and optimism floating around should we declare that the housing market has hit bottom and is on its way to recovery?  Probably not.  There are still many factors that could hold the market down this year but that doesn’t meant that now is not a good time to buy.  Now is a great time to buy a home.  If you have been thinking about buying a home now is the time to get off the sidelines.  Mortgage interest rates have never been better and home prices are still at 2003 levels.  Call us now.

 

About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.