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Hi all,
An article from the June 20th edition of The Globe and Mail (Report on Business). It discusses the US market in general and the Phoenix market in particular. Excerpts:
Greg Swann should be happy with what he is seeing in the Phoenix housing market. Mr. Swann is a real estate agent and, after years of plunging prices and soaring foreclosures, the market is suddenly taking off. Bidding wars have broken out, prices are climbing and buyers are pouring in from all over, including many from Canada.
But Mr. Swann isn`t smiling. He`s worried. The current buying frenzy "is absurd," he says.
"I really don`t like to be a bear because obviously it`s not good for my income, but there is no shortage of homes in Phoenix," he said. "We have a false perception of a shortage. … There is going to be another surge of foreclosed homes on the market, because they are out there."
What`s playing out in Phoenix is happening across much of the United States. Eager investors have started snapping up distressed properties, convinced the market has bottomed out and the deals will soon be harder to find.
Those buyers may regret rushing in. There are signs that the problems in the housing sector are far from over, especially as the economy continues to struggle and unemployment rises. At the same time, mortgage rates are climbing, government programs designed to help stop the tide of foreclosures aren`t able to keep up and there`s a huge number of houses that have yet to hit the market.
"We`re in for an L-shaped recovery in the housing market, which means we`re going to hit a bottom and we`re going to stay there, bouncing around, for a while," he said.
That will affect more than just homeowners. Much of the U.S. economy hinges on a recovery in the housing market, where most of the current financial troubles first emerged. Without a rebound in housing, economists fear a lag in consumer confidence and spending, which powers two-thirds of the U.S. economy.
Phoenix offers the most dramatic example of the decline and fall of the housing market.
Buyers now often face bidding wars as soon as a property is listed for sale.
As demand has surged, the number of foreclosed houses listed for sale has dropped significantly in recent months. Many say that is what has prompted investors to falsely believe the market has hit bottom.
The drop is misleading and temporary, argues Jay Butler, director of realty studies in the Morrison School of Management and Agribusiness at Arizona State University.
Interest rates are another problem. Mortgage rates plunged to record lows in early 2009, helping to make buying more attractive. But now rates are rising because of the resurgent confidence in the global economy.
The rock-bottom mortgage rates of early 2009 were a side effect of the global financial crisis that the plunge in housing started in the first place. In those dark days, with stocks plunging and fear of economic meltdown everywhere, investors flocked to government bonds, driving interest rates to record lows. Mortgage rates – which are based on government bonds – went down in tandem.
Now, with confidence improving, investors are moving money out of the safe havens of government bonds and interest rates are going up. As a result, so are mortgage rates – and fast.
About four million mortgages – representing almost 10 per cent of all the U.S. home loans currently outstanding – were delinquent at the end of March, according to the Mortgage Bankers Association. Many of those homeowners ran into problems in the first two waves of the housing crisis, when house prices began to fall and mortgage "teaser" rates were reset higher, making payments unaffordable.
Now, a third wave of defaults is beginning, as even careful borrowers who had been diligent in making payments are falling behind because they`ve lost their jobs.
About 20 per cent of American homeowners now owe more than their house is worth, according to Zillow.com, and the number is growing fast. Just six months ago, the percentage stood at 14.3.
And if it`s all about the economy, it doesn`t bode well for Phoenix. About 130,000 jobs have disappeared in the past year in a region with a population of 4.3 million, almost doubling the unemployment rate to 6.8 per cent in April.
With that, there are signs that after decades of surging population growth, the number of people in Phoenix is stagnating, if not dropping, according to an analysis done recently by a local newspaper.
That makes it hard to get excited about the real estate market`s supposed signs of life, Prof. Butler said.
http://www.theglobeandmail.com/globe-inves...article1190012/
Keith
An article from the June 20th edition of The Globe and Mail (Report on Business). It discusses the US market in general and the Phoenix market in particular. Excerpts:
Greg Swann should be happy with what he is seeing in the Phoenix housing market. Mr. Swann is a real estate agent and, after years of plunging prices and soaring foreclosures, the market is suddenly taking off. Bidding wars have broken out, prices are climbing and buyers are pouring in from all over, including many from Canada.
But Mr. Swann isn`t smiling. He`s worried. The current buying frenzy "is absurd," he says.
"I really don`t like to be a bear because obviously it`s not good for my income, but there is no shortage of homes in Phoenix," he said. "We have a false perception of a shortage. … There is going to be another surge of foreclosed homes on the market, because they are out there."
What`s playing out in Phoenix is happening across much of the United States. Eager investors have started snapping up distressed properties, convinced the market has bottomed out and the deals will soon be harder to find.
Those buyers may regret rushing in. There are signs that the problems in the housing sector are far from over, especially as the economy continues to struggle and unemployment rises. At the same time, mortgage rates are climbing, government programs designed to help stop the tide of foreclosures aren`t able to keep up and there`s a huge number of houses that have yet to hit the market.
"We`re in for an L-shaped recovery in the housing market, which means we`re going to hit a bottom and we`re going to stay there, bouncing around, for a while," he said.
That will affect more than just homeowners. Much of the U.S. economy hinges on a recovery in the housing market, where most of the current financial troubles first emerged. Without a rebound in housing, economists fear a lag in consumer confidence and spending, which powers two-thirds of the U.S. economy.
Phoenix offers the most dramatic example of the decline and fall of the housing market.
Buyers now often face bidding wars as soon as a property is listed for sale.
As demand has surged, the number of foreclosed houses listed for sale has dropped significantly in recent months. Many say that is what has prompted investors to falsely believe the market has hit bottom.
The drop is misleading and temporary, argues Jay Butler, director of realty studies in the Morrison School of Management and Agribusiness at Arizona State University.
Interest rates are another problem. Mortgage rates plunged to record lows in early 2009, helping to make buying more attractive. But now rates are rising because of the resurgent confidence in the global economy.
The rock-bottom mortgage rates of early 2009 were a side effect of the global financial crisis that the plunge in housing started in the first place. In those dark days, with stocks plunging and fear of economic meltdown everywhere, investors flocked to government bonds, driving interest rates to record lows. Mortgage rates – which are based on government bonds – went down in tandem.
Now, with confidence improving, investors are moving money out of the safe havens of government bonds and interest rates are going up. As a result, so are mortgage rates – and fast.
About four million mortgages – representing almost 10 per cent of all the U.S. home loans currently outstanding – were delinquent at the end of March, according to the Mortgage Bankers Association. Many of those homeowners ran into problems in the first two waves of the housing crisis, when house prices began to fall and mortgage "teaser" rates were reset higher, making payments unaffordable.
Now, a third wave of defaults is beginning, as even careful borrowers who had been diligent in making payments are falling behind because they`ve lost their jobs.
About 20 per cent of American homeowners now owe more than their house is worth, according to Zillow.com, and the number is growing fast. Just six months ago, the percentage stood at 14.3.
And if it`s all about the economy, it doesn`t bode well for Phoenix. About 130,000 jobs have disappeared in the past year in a region with a population of 4.3 million, almost doubling the unemployment rate to 6.8 per cent in April.
With that, there are signs that after decades of surging population growth, the number of people in Phoenix is stagnating, if not dropping, according to an analysis done recently by a local newspaper.
That makes it hard to get excited about the real estate market`s supposed signs of life, Prof. Butler said.
http://www.theglobeandmail.com/globe-inves...article1190012/
Keith
