February 23rd, 2010
Housing Market Shaping Up – More homes, More Affordability
The housing market is beginning to look wide-eyed and healthy early in 2010, thanks to several factors contributing to the beginning of a mild recovery.
Housing construction and production rebounded in January—the highest level in the last six months– increasing 2.8% to a pace of 591,000 units, stronger than analysts’ expectations of 580,000 units. That is a 21.1% increase compared to January 2009, the largest increase since April 2004.
In addition, CNN Money reports on the housing market’s record lows of home affordability. Nearly 75% of all U.S homes on the market—the highest rate in 18 years—are affordable to the typical American family living on the nation’s median income of $64,000 a year, compared to only 55% were affordable at the end of 2008. This promising market trend is a sign of stabilizing and recession-friendly home prices. For more on the nation’s most affordable areas to buy a home, check out CNN’s article.
Home affordability, better-than-expected rates of housing construction, as well as attractive mortgage rates hovering close or below 5%, mini-booms in refinancing, and the incentive of the home buyer tax credit all give hope to a strong housing recovery. But this recovery is not without potential pitfalls.
The housing sector, one of the worst hit in this recession, still has a long way to go to achieve a sustained and stable recovery. One of the biggest concerns from economic analysts is the impact of withdrawing federal support from a market still shaky on its feet. The extension and expansion of the homebuyer tax credit should boost demand in the next months, but the ever growing number of foreclosures and near-10% unemployment rate threaten to collapse the market again once Uncle Sam’s foreclosure help, housing programs, and tax incentives expire.
It is still a positive surprise that construction of new homes is generating more movement in sales, maybe enough of an upturn to rise out of the 3-year slump of the market. At the very least, it’s a ray of sunshine breaking through a stormy housing climate. Stay tuned to housing market news on Fridays for the latest mortgage rates, thoughts, and reports on the housing front.
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