Housing Set for Spring Recovery as ‘Fear Factor’ Fades

Five years after the U.S. housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery.

Reduced prices, record-low mortgage rates, higher rents and an improving job market appear to be emboldening many would-be buyers. 

Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.

And many people seem to have concluded that prices won't drop much further. In some areas, prices have begun to tick up. 

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Housing Inventory is Shrinking...Good News for the Housing Sector

There were fewer homes listed for sale at the end of 2011 than in any of the previous four years, a positive sign for the housing sector.

But appearances can be deceiving, and it remains to be seen whether the drop is the beginning of a real recovery or if inventory is being held down by sellers waiting for prices to pick up and banks moving slowly on foreclosures.

The 1.89 million homes on the market at the end of December represented a 6% decline from November and a 22.3% decline from one year ago, according to data compiled by Realtor.com.
Low inventories are an important ingredient for any housing recovery because prices could firm up in markets that have worked through their inventory.

Still, some real-estate agents aren’t celebrating because there’s a large backlog of potential foreclosures that haven’t yet been taken back and listed by banks. The inventory declines are particularly pronounced in certain states where banks have sharply slowed down foreclosures to correct document-handling abuses.

Moreover, some sellers have pulled their homes off the market to wait for a turn in prices, and that “pent up” demand from sellers could keep inventories higher once prices do rise.


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