A report recently released by Trulia shows the real estate market is only 75% on the way back towards what could reasonably be considered to be “normal.” The report takes into account a number of different factors which include existing home sales, new home construction, mortgage delinquencies and prices.
According to the article in Realtor Mag, a full recovery is being held back by two particular areas which are the delinquency rate and the rate of employment amongst the millennial generation. Overall, the recovery seems to be largely driven by prices and existing home sales and is expected to yield more gains this year. In November existing home sales were up by 2.1% compared to a year earlier, while pending home sales were up by 4.1% year on year, according to figures from the National Association of Realtors. The figures for pending home sales were the highest annual gains seen since August 2013.
Rents are currently at a seven year high and when this factor is combined with historically low interest rates and more moderate price growth it’s likely to encourage more buyers to enter the market during the coming months. However employment levels amongst young professionals aged 25 to 34 are only 46% back to normal levels and this is the weakest area of recovery in the housing market. The good news is that there have been some notable gains in this area just recently and employment levels amongst young adults reached 76.4% in December compared to 75.5% the year earlier.
Loan delinquencies are another area of concern as data from Realty Trac shows more than 1 million properties had foreclosure filings last year. On the plus side, this marks the lowest level seen since 2006 but the foreclosure level isn’t yet back to normal. In addition, the number of foreclosure starts in December reached a 17 month high as lenders began to clear a backlog of delinquent mortgages. It’s expected this could delay a return to more normal foreclosure levels for another two years.
Thankfully the number of distressed loans doesn’t seem to be increasing and even though there are still high numbers of loan delinquencies in many areas this is likely due to delays in the foreclosure process. In addition, inventory levels for lower priced properties are currently low so those homes that are repossessed and put up for sale should be bought relatively quickly.