Daily Real Estate News | April 28, 2011 |
One key step to the housing recovery is already occurring, economists and real estate agents say. That is a drop in the high inventories of homes for sale that are lingering on the market in areas hardest hit by foreclosures.
Clearing away the inventory of foreclosures is crucial to turning around the market, since foreclosures and distressed homes can weigh heavily on home prices, industry insiders say.
Economists say home prices will stabilize as the supply of these bargain-priced homes decrease. In turn, more buyers and sellers will get more confident and return to the market, and home prices will begin to rise.
Investors are helping to clear away the glut of foreclosures by taking advantage of ultra low prices in Detroit, Las Vegas, Miami, Phoenix, and Tampa. In those five cities, such sales have helped to shrink the combined supply of unsold homes by 13 percent over the past year, according to an analysis by the Associated Press.
"If we were to see several consecutive months of supply getting smaller, it would point to an improving housing market," says Celia Chen, senior director at Moody's Analytics. "Even if it is investors buying them, they are renting them out in hopes that prices in the next several years will rise."
However, the housing market isn’t out of the clear quite yet, economists caution. A second wave of foreclosures looms — foreclosures that had been delayed by banks and backlogged courts.
"The problems are still there," says Mark Vitner, senior economist at Wells Fargo. "There are fewer early-stage delinquencies, so we are moving in the right direction. But the slowdown in foreclosures is just drawing the process out."
Source: “Bargain Prices Help Reduce Glut of Foreclosures,” Associated Press (April 21, 2011)
