The overall United States housing market appears to be rebounding from its historical collapse a few years ago, but some real estate and financial experts say that it’s simply roaring back up into a bubble akin to the subprime meltdown. The administration, meanwhile, points to its latest scorecard highlighting how the market is becoming healthy again.
Last week, Department of Housing and Urban Development (HUD) in collaboration with the U.S. Treasury released the June edition of the Obama Administration’s Housing Scorecard, which portrayed the housing market making significant gains, an improvement being celebrated by an embattled White House.
According to the scorecard, new home purchases rose 18.6 percent in May with 504,000 sales, compared to 425,000 in April, which is the largest monthly increase since Jan. 1992. Annual home sales were also up 16.9 percent compared to the same time a year ago.
Sales of existing homes, such as single-family homes, condominiums, cooperatives and townhomes, saw a 4.9 percent increase with 4.89 million sales, but were down five percent when measured on an annual basis.
Foreclosures persisted in their decline in the month of May. Mortgage lenders completed 28,373 foreclosures, which is down six percent from the previous month and down by more than one-quarter (27 percent) from a year ago to its lowest level since Jul. 2007. However, bank repossessions were up annually in more than a dozen states.
Citing data from the Federal Reserve, homeowners’ equity rose close to $795 billion in the first quarter of this year and reached $10.8 trillion, the highest figure since the second quarter of 2007. Since early 2012, homeowners’ equity has increased $4.6 trillion, or 73 percent, through the first quarter of this year.
“Sales of new and existing homes are up, equity continues to grow, and foreclosure starts continue trending down,” said Katherine O’Regan, HUD Assistant Secretary for Policy Development and Research, in a statement. “While these are all signs of a healthy recovery, given the severity of the housing crisis, we must stay committed to helping homeowners.”
Last month, Treasury Secretary Jack Lew confirmed an extension to the Home Affordable Modification Program (HAMP) until the end of 2016. Lew alluded to the fact that millions of homeowners still need assistance in regards to rising rates, delinquent loans and foreclosures.
“Although the housing market continues to improve, Treasury remains committed to helping homeowners who are still struggling to make their mortgage payments,” stated Treasury Acting Assistant Secretary Tim Bowler. “To date, more than 1.3 million homeowners have received a permanent modification through the Home Affordable Modification Program (HAMP), saving an estimated $28.2 billion in mortgage payments.”
Despite the positive numbers, a majority of North American mortgage bankers are frightened by the prospect that another real estate bubble is developing. According to a survey for FICO, 56 percent of American and Canadian mortgage professionals are concerned that “an unsustainable real estate bubble is inflating.”
Karl Case, an economist who co-founded the S&P/Case-Shiller home price indexes, called the housing market a “crapshoot” and referred to the market as “segmented.” In other words, it isn’t a guarantee that housing prices will heighten and that investors should be concerned more with demand, considering that millennials are being priced out of the market.
Due to enormous student debt levels, stagnant wages, a lack of lucrative employment opportunities and a rising cost of living, millennials are refraining from purchasing a home, or delaying the move anyway. With so many costs to owning a home – mortgage costs, home insurance, maintenance, utilities and much more – a large number of millennials may not acquire property anytime soon.
Asking prices for homes in cities like Birmingham, Atlanta, Detroit and Bakersfield rose between 13 and 17 percent, while wages in these cities have only gone up by an average of 0.5 percent.
David Stockman, former Reagan budget director and author of “The Great Deformation,” stated in an interview with Yahoo! Finance:
“It’s happening in the most speculative sub-prime markets, where massive amounts of ‘fast money’ is rolling in to buy, to rent, on a speculative basis for a quick trade. And as soon as they conclude prices have moved enough, they’ll be gone as fast as they came.”
