Most housing market drivers are now either positive or neutral but mortgage rates and mortgage applications, both new and refinance, have recently turned negative. As a result, what looked like the beginning of a sustained recovery a few months ago has stalled. The multi family market may be in a sustained recovery but the single family market has weakened in the last two months. The latest single family data is a small dip in pending home sales in January and a small downward revision for December.
Consumer confidence jumped sharply in the last few months from the 50 to the 70 level (100 is average) and job gains continue strong in spite of the weak reading for January. But so far this is not enough to overcome the negatives in the housing market. These include as many as 15,000,000 households locked out of the market by loss of net worth, income or an acceptable credit score as well as scant likelihood of quick capital gains in the housing market and the lack of liquidity for current homeowners who can not risk buying before they sell their current home.
It will take longer to forget the losses that dominated the housing for the last four years. Homeowners lost equity, lenders lost investment capital and homebuilders lost net worth. In many cases these losses caused foreclosures or bankruptcy. Ever player in the housing market is extremely cautious to protect their remaining assets. Lenders have gotten very fussy with mortgage application documents and 20% minimum down payments and, according to some real estate brokers, are pressuring appraisers for low valuations in a period of falling home prices. Prospective homebuyers are too cautions to buy a housed before they sell their current house. Homebuilders are too cautious to build an inventory of home ahead of a rise in demand. This extreme caution is gradually ebbing but will be a serious constraint on housing activity at least through 2012.