If the struggling housing market has you confused, it’s understandable. Americans were treated to seemingly contradictory pieces of information about the American real estate market on Tuesday. One of them may have given you hope. The other, not so much.
According to U.S. Census data, recent foreclosures and more homes for sale have led to nearly 18.9 million houses in America being left empty. About 85.6% of U.S. homes are occupied, according to the Census Bureau's report. That’s the lowest occupancy level since 1999.
Generally, that kind of rise might be seen as the beginning of a real estate market recovery, but not so fast, says Patrick Newport, an economist at IHS Global Insight. Despite the positive impression that the increase in home prices leaves, neither statistic is particularly encouraging.
First off, the Census Bureau’s data don’t include homes that are empty while pending foreclosure, according to Newport. “A lot of these homes are not for sale yet,” he says.
“It may take up to a year for a foreclosure to occur, and homes that have been simply abandoned would not be included in the statistics we’re seeing,” says Kurt Gleeson, vice president of National Sales at Realestate.com.
That means that the actual number of empty homes could be even higher than the already elevated numbers the Census Bureau is reporting.
Secondly, the climb in home values was likely skewed by the $8,000 new homebuyer tax credit, which was available until April 30 and enticed those already considering a purchase into sealing a deal. In other words, the effect of the incentive was to boost demand for homes.
“As a result of increased demand, we saw a commensurate increase in prices in certain markets,” says Gleeson. “What’s happened now, post-April 30, we’re seeing a post-tax credit hangover. There’s no incentive to rush,” he adds.
In fact, some predict that the market is going to get worse before it gets better.
“I don’t think we’ve hit the bottom of the real estate market. We’re going to see an uptick in foreclosures for the remainder of 2010,” Gleeson says.
To finally reach a turning point, there would have to be a good deal of job growth, both analysts say. In a deep recession, job losses mean moving in with relatives or friends or taking on roommates.
When the job market picks up and as the economy continues to grow, Americans will be ready to buy again, says Newport.
“There’s a great opportunity if you’re a buyer. There’s plenty of inventory at very attractive prices. However the challenge continues to be [finding] an available pool of buyers. People who are unemployed or underemployed can’t qualify for financing,” Gleeson says.