Is Housing Recovering as Much as Everyone Thinks?

The news is finally good: Consumer sentiment in housing is at the highest level since the recovery began.

Realtors say not only are buyers coming back, but much-needed sellers are too. Inventories of distressed properties are shrinking, and mortgage rates are hitting record lows nearly every week. (Read More: Is Housing Rising From Ashes? ‘Industry Has Come Back’.)

The housing crisis is over, right?

“While we have seen many dramatic headlines touting the housing recovery over the last 3.5 years, these headlines and the analysts who author them have been over- predicting changes in the housing market (versus what actually occurred).” said Laurie Goodman of Amherst Securities in a new report.

“Recoveries, with attendant price increases, were anticipated in the spring and summer of 2009, 2010 and 2011; by the fall and winter the predictions of price changes were amended to reflect further price declines. In actuality, after netting out the seasonal factors, home prices have been little changed in the past few years.”

Does that mean that we’re headed for yet another housing scare come Halloween time?  Is housing’s winter chill just around the corner? Not according to the bulk of Americans surveyed in yet another new report:

“Consumers are showing increasing faith in the nascent housing recovery,” said Doug Duncan, senior vice president and chief economist of Fannie Mae. “Home price change expectations have remained positive for 11 straight months, and the share expecting home price declines has stabilized at a survey low of only 11 percent.”

The expectation is now that home prices will increase an average of 1.5 percent in the next year, according to the survey, and that has sellers coming back to the market. Of those surveyed, 19 percent said now is a good time to sell. That’s the highest since the survey began in June 2010. But wait, 19 percent? That’s still not a lot.

These national surveys seek overall trends and tout big headlines, but real estate is and always will be local, and this recovery is becoming increasingly local. That is clear in the latest numbers on supplies of distressed homes.

The so-called “shadow inventory” of homes that either have seriously delinquent mortgages, are in the foreclosure process or are bank-owned but not yet listed for sale, fell to 2.3 million units in July according to CoreLogic. That’s a 10 percent year-over-year drop, and puts the supply at about six months by the current sales pace.

Read the full article on CNBC website →