The residential real estate industry has been through a lot over the past 10 years. Through the lofty heights of the boom to the how-low-can-you-go depths of the foreclosure crisis, real estate professionals and industry analysts asked themselves the same question: How long can this last?
A better question may have been "What will the market look like when this is over?" When the boom was over, the market was a mess. As home prices have started to inch upward and foreclosure rates have begun their descent -- CoreLogic reported 28,341 completed foreclosures in Illinois during 2013, more than a 9 percent drop from 2012 -- it has become clear to insiders that a recovery would bring a different kind of market.
The recovery would be glacially slow if analysts were gauging gains against the peak of the boom. The industry is moving toward a more realistic definition of recovery. The hope is that local markets will shed their high foreclosure rates and distressed mortgages and then level off into healthy, sustainable growth. And in this context, growth encompasses both home sales and construction of new homes.
April and May generally see a high volume of home sales. Prices increase, and inventory goes up when the season opens and dwindles steadily as the season comes to a close. That may change a bit this year.
The current market offers a reduced inventory of homes in foreclosure, and that should tempt individuals and families back into homebuying. The smaller foreclosure inventory, however, means fewer bargains -- and that means buyers are looking at paying more. But higher prices mean that more homeowners could decide to sell, which could increase inventory and reduce average home prices, if only a little.
Add to that the historically low mortgage rates, and we could have a healthy, sustainable market.
But there's a catch. And we'll get into that in our next post.
Source: Alaska Dispatch, "Could 2014 be the year the housing market really recovers?" Mark Trumbull (The Christian Science Monitor), March 23, 2014