Housing Recovery Saves Homeowners, Improves the Market

The US housing recovery is still considered lukewarm by many experts, and most suggest the turnaround is unlikely to become a full-on housing boom in the short term.  Nevertheless the recovery has reportedly saved over 4 million homeowners over the last year from being ‘underwater,’ where borrowers owe more on their mortgage than their home is worth.

The recovery looks to be gaining momentum and housing is in much better shape than it was in 2008.  Back then approximately 12 million Americans owned a home that was worth less than the mortgage they were paying.  However, home prices finished 2012 worth over 7 percent more than what they were valued at in the beginning of the year, which has reduced the number of ‘underwater’ Americans by 4 million.
Karen Weaver, a market strategist with Seer Capital Management LP, says the entire economy benefits as the housing market continues to recover.  Rising home values help homeowners maintain anaffordable mortgage, which is helping more Americans once underwater rise to the surface again.  Weaver believes that as more people get their home and personal finances in order, they will have more money available for greater consumption.
“So once the housing market starts to recover it helps consumer spending, it helps the whole economy.”

A number of factors have contributed to the rise in home values.  There have been fewer foreclosures over the past year, which has reduced the number of homes available on the market.  Along with record low interest rates – which the government has vowed to maintain over the next two years – Americans are feeling confident enough to buy property again.  There were over 4.2 million homes sold last year, which is the first reported annual increase in sales activity since 2005.

Anand Nallathambi, CEO of real estate analyst firm CoreLogic, is optimistic that the improvements mark the beginning of a real recovery – but cautions there is still a long road ahead.

“We still have a long way to go to return to 2005-2006 levels, but all signals currently point to a progressive stabilization of the housing market and the positive trend in home price appreciation to continue into 2013.”