I puzzled over a bit of seemingly self-negating information Tuesday. Housing starts in the month of March declined by a striking 5.8%. This takes some of the wind out of our sails. Obviously, we don’t get to continue moving toward a sustainable recovery on a straight, easy-to-negotiate path, it’s a little more complicated than that.
This should not surprise us, even if it shakes us up a bit. The other possibility, of course, is that we’re not moving securely down the recovery trail at all, and the remaining gloomsters who see us – particularly the real estate market – dropping off the edge of the earth sometime soon are giving each other high-fives because of their seeming sagacity.
Pay no mind – not even to the wonderful Nouriel Roubini. We are still headed in the right direction, for the most part. After all, the seemingly self-negating portion of this indicator was that, while March starts fell by 5.8%, builders bought up 4.5% more housing permits than they did in February.
Does this mean that builders are less sanguine about today’s market but, at the same time, a bit more optimistic about the future of the market – say, three plus months in the future???
It very well may. And it would serve us well to remain aware of the fact that large construction firms, lenders and real estate brokers are readying themselves for sizable growth in real estate sales – not tomorrow, but not too long after tomorrow either. We read a lot about how things will be visibly improved in 2013, we’ll see… In the meantime we ready ourselves for the possibility.
Actually, last week’s was a tepid serving of economic indicators, at best. Even the fact that the Freddie Mac average fixed rate for 30-year mortgages fell to within one basis point of its all-time low of 3.87% barely elicited a smile on the face of the markets.
One little piece of information, though, seemed to me extremely relevant – and under-reported: This past January saw more short sales close nationally than foreclosures. Stay with me on this.
The number of foreclosures on the market has tightened up a bit. The people at DataQuick, who watch this sort of thing, warned us not to get too excited because there is still a mountain of foreclosures to process. The lenders, they said, are just pausing for a time – then watch out! Foreclosures everywhere we look!
But here’s how it’s actually working. Lenders are finally discovering that they can process short sales in less time and at significantly less cost than foreclosures. Consequently, they’re putting fewer foreclosures on the market. Consequently, market inventory of distress properties has declined. And consequently, fewer homes are selling each month. Nowhere is this more true that the Roseville and greater Sacramento market, where real estate inventories are near all time lows.
However, more homes are selling as short sales, which – if done right – makes everyone a lot happier and costs less to accomplish. Good deal! We may at last be in the first stages of developing short sale systems that are truly efficient and cost-effective.
And these short sales may just prove to be the first version of a new generation of mortgages that meet the needs of individuals more precisely, and are far less likely to be hit by defaults.
Lastly, of course, a more efficient use of short sales is surely the best way to establish the floor of today’s real estate values and to get distress sales off the back of our real estate market. The overall local economy, as well as that of the entire nation, would benefit greatly from that.
We’ll see, but so far, this looks like good news and quacks like good news. It must be good news, therefore….