Where Are We In This 2011 Housing Market ?

2011 Housing Market ?

There are numerous opinions as to whether or not 2011 will be the year the housing market hits bottom. These opinions range from the very negative to the overly optimistic, but if one is looking at the market they can see where on one hand a bright horizon may be dawning but on the other storm clouds may be forming. Is the market like the proverbial glass, “is it half full or is it half empty?”

Analysis of the real estate market by the firm Moody’s Analytics has shown that housing is the most affordable it has been in decades.* Moody’s does not just look at housing prices, but also at income. It compares the equivalent of a year’s pay to the cost of the house. In other words on a national level the price of a home would be equivalent to how many years of pay. Houses nationally in the past would average close to two years pay, whereas now they are equivalent to 19 months of pay. This is the lowest it has been in 35 years.

Inventory of houses have started to shrink, especially in those areas hardest hit by foreclosures. One reason for this is investors are finding the prices of homes very attractive. Prices of homes have not been this attractive in decades; this is prompting investors to buy - with many paying cash. In some areas of the country, bidding wars have occurred. This makes it difficult for the average buyer to be a part of the buying process. With investors buying these properties and renting them, they are reducing the huge supply of inventory that’s currently available and this can only have a positive impact on the market.

If we continue to see several months of a shrinking supply of homes, indicators would point to an improving market. The market could stabilize and homeowners could feel confident they could sell for a decent price, and move on to purchase another home.

But on the horizon are there a large number of foreclosures that the banks have not yet put on the market?

*Smartmoney.com 4/27/2011