The recovery of the housing market is on firm footing, although housing prices in the aggregate are unlikely to rise quickly, according to speakers and participants at Information Management Network's ABS East conference.
“Housing will improve [but] probably close to the rate of inflation or GDP,” said Mark Fontanilla, vice president in the residential mortgage research team at Wells Fargo Securities.
Unemployment and a slowly growing economy are factors contributing to the relatively subdued growth. Also to blame are underwhelming mortgage demand and availability. Even though households have deleveraged over the past few years, many are unable make the down payment and only a minority can hit the Fico scores that lenders are requiring.
In addition, Fontanilla pointed out that housing formation is rising at a slower rate, while people are less mobile than before the crisis.
This, of course, means that it will take a while for those homeowners who are underwater to see their equity turn positive. Those with negative equity are not contributing to either demand or supply, according to Mark Fleming, chief economist at CoreLogic. But once they are no longer underwater, they will have more opportunities to enter the housing market.
Citi’s Global Head of Research Mary Kane said some potential buyers might be deterred by the perception that we actually have not hit bottom with housing prices.
Certainly, not all markets are behaving similarly across the U.S., with some cities — especially those hit hardest in the crisis — seeing much bigger price increases than others. “The market is still behaving more locally than globally,” said Bill Hunt, a vice president at Opera Solutions, speaking on the sidelines of the conference. “It’s still a local game, in terms of correct prices and growth over time.”