How healthy is the market?

According to the Commerce Department, housing permits rose in October to the highest level in more than five years. This surge was driven by increased demand for multifamily housing.

And while the Standard & Poor’s/Case-Shiller home-price index revealed prices in most U.S. cities increased in September, the rate was actually slower than in previous months.

Analysts believe the housing market indicators are showing signs of stabilization. But weaker consumer confidence and increases in mortgage rates could weaken the sector.

Overall, the market has gotten better but there are still markets across the country that are stronger than others.

Realtors saw the housing market react earlier this year to an increase in interest rates after the Federal Reserve indicated it was thinking of scaling back its bond-buying program, which is intended to keep long-term interest rates in check. Once the Fed indicated that it would continue this program throughout the summer and fall, the real estate market became more active.

The number of building permits issued in October increased more than 6% from where they were in September, which is the strongest rate since June 2008. Multi-family home permits increased more than 15% in October when compared to single-family homes that rose less and offset some of the summer decline. According to industry analysts, the single-family home segment is a better gauge of the real estate market’s health. Housing starts and permits in single-family homes indicate builder optimism or confidence.

Home prices across the nation (based on a survey of 20 major U.S. cities) increased a seasonally adjusted 1% in September when compared to August and more than 13% year-over-year, according to the S&P/Case-Shiller index.

There are other concerns for the housing market. The health of the real estate market is also contingent upon job growth, and consumer spending and consumer confidence decreased in November to its lowest level since April, according to the Conference Board research group.

A positive sign is that the number of homeowners behind on their mortgages by 60 days or more decreased in all U.S. states when compared to what it was a year ago, according to Trans Union. According to this source, the national delinquency rate of 4.09% is down from 5.33% when comparing this year with the same time frame as last year.

The largest year-over-year declines were in Arizona, California and Nevada, where delinquency rates fell 32% to 38%. These were the states with the greatest spikes in prices and sales. An increase in interest rates would adversely affect delinquent borrowers from resolving their financial obligations. Distressed loans are expected to decrease in the coming months as older loans are addressed by lenders.

Foreclosures in September were 39% less than what they were in September 2012. The foreclosure inventory (in all stages of being distressed) was down 33%, according to CoreLogic.

Delinquent borrowers continue to have difficulty refinancing their homes. Almost a third of the delinquent borrowers indicated they were unsuccessful in refinancing during the last three years in a Fannie Mae national housing survey. The reasons cited were the inability to qualify or to get affordable loan terms. Despite these struggles, delinquent borrowers still value home ownership and are encouraged by the improving real estate market.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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