Housing Recovery Pace Predicted To Slow

Recent trends within the housing industry have witnessed incredible appreciation rates. Certain regions, California in particular, were the beneficiaries of double-digit gains in value over the last year. However, it would appear as if the impressive price gains are starting to temper. Rising mortgage rates, in association with decreased investor activity and inventory shortages, have halted the yearlong rebound. As a result, analysts predict the housing recovery to slow down on a national level.

“It’s clear there will be some moderation in demand,” Lawrence Yun, chief economist for the National Association of Realtors (NAR) told the Wall Street Journal. According to Yun, home-buyer foot traffic at listed homes, which is quantified by the use of electronic, showed a “measurable decline” in August.

It would appear, for now, that the housing recovery has started to pace itself. Demand has certainly declined in the face of several market indicators. As a result, recovery expectations must be tempered. While the return to normalcy appears to be sustainable, it may take longer than originally anticipated.

Analysts familiar with the housing sector believe the slowdown will take the biggest toll on the new-home market. Subsequently, builders have been raising their prices aggressively while many buyers remain unable to close on homes because of the increasing mortgage rates.

Hovnanian Enterprises Inc., a large provider of new homes, said it’s seen a 12.7 percent decline in new orders during July and August because of rising rates.

While some may be inclined to panic over the slower pace of the housing recovery, it is important to understand that real estate typically slows down this time of year. In fact, there are many who welcome the decline, as recent price gains may not have been sustainable for our fragile economy. A slower pace may facilitate a prolonged recovery.

“The market is having a bit of a hangover. We partied pretty hard, and you can’t go on partying like that all the time,” says Greg Markov, a real estate agent with HomeSmart International in Phoenix.