Yale economics professor Robert Shiller stated last week that the
US housing recovery could take an entire generation, with low confidence, high
living costs and increasing unemployment all deterring buyers.
"I worry that we might not see a really major turnaround in our
lifetimes," he told Reuters.
But Shiller may be about to be proven wrong, as a torrent of new reports
suggests that US real estate is ready to bounce back from the brink of collapse.
Is America's recovery the real deal?
According to the National Association of Realtors, things look
promising. The association's forward-looking index of pending sales saw that
contract signs rose by 4.1 per cent in March from February, 12.8 per cent above
the same month last year. Indeed, the total number of sales in the first
quarter of 2012 was the highest quarterly figure in five years, prompting NAR
economist Lawrence Yun to herald 2012 as a year of recovery.
Similar records were set by Zillow's
latest market report, which found that home values rose by 0.5 per cent
from February to March, the largest monthly increase in six years. With prices
expected to stay stable for the next 12 months, Zillow are equally confident
that the market has effectively hit bottom.
people who have been waiting to time their home purchase close to market
bottom, it's time to start shopping," commented Zillow's Chief Economist Stan
Shiller disagrees with both, even though the S&P/Case-Shiller index found
that seasonally adjusted prices in 20 metropolitan areas increased by 0.2 per
cent in February this year, "the first uptick in prices in 10 months".
Shiller, co-creator of the index, highlights the nine markets that hit
post-bubble lows as a sign of continuing decline. "House prices have not been
this low since 2002," adds CNN,
The low prices are certainly bad news for US residents, with home
ownership down across the country and only half believing that their property
is worth more now than when they bought it, a huge drop from 92 per cent in
But agents insist that while many homes are underwater, this is now
a buyer's market, encouraging investors to take advantage of a "significant
opportunity". 80 per cent of agents, according to a new RE/MAX survey,
believe that house prices will not drop any further, with 70 per cent
predicting that they will rise soon.
"With distressed properties still making up a sizeable portion of
homes on the market, this inventory is being cleared effectively by buyers, who
don't mind investing a little to fix up a property in return for an attractive
bargain," RE/MAX CEO Margaret Kelly commented.
Other agents are less enthusiastic, though, particularly when it
comes to the more troubled states. Speaking to OPP last week, Assetz
International Ltd warned buyers not to pick up property in Detroit after a
business partnership went sour, leaving buyers without refurbished properties
sourced new suppliers to complete the house refurbishment works for typically
$2,000 to $13,000 additional expenditure above the original purchase price,
which enabled the investors to let the properties at yields of between 10% and
14% rather than the previously indicated 15%," recounted Assetz CEO Stuart Law.
"This is still a very good outcome and two to three times UK net yields but the
business failure caused distress to many of the purchasers."
all buyers did everything right," he added, countering any claims of fraud or
ignorance. "They went over there on site visits, they carried out their own due
diligence on top of that which we carried out, they looked into the rental market,
but still got caught out..."
would no longer recommend Detroit," he concluded. "There are easier and safer
places to put your money."
With agents, realtors, property portals and market experts
disagreeing over various details, who can accurately gauge whether the American
housing market really has turned the corner?
Perhaps the Americans who actually own the property are the
best-placed to judge. A new
survey from Gallup found that while 62 per cent of US homeowners said that
their home was not worth more than when they purchased it, even they admit the
affordability of US property makes this a good market for investment. 70 per
cent of respondents said that "now is a good time to buy a house", up from 53
per cent in 2008.
"Most Americans recognize that now is likely a good time to
buy a house," surmises Gallup. "Mortgage rates remain at historical lows and
Federal Reserve policy seems determined to keep them low for some time to
Whether you believe Mr. Shiller's interpretation or not, the
one thing that everyone agrees upon is that house prices are at an all-time
low. And for many buyers, that may be enough.