At the Throes of the Great Comeback of the Housing Industry
At last, we are now seeing strong indications that the painful slide of the real estate industry is now about to reach its threshold point. After several years of downward spiral across all segments in the housing industry and home construction slowdown, this year promises to be the payback time for the sector.
However, we will not experience an absolute recovery as several lingering effects will continue to temper the positive reversal that we are going to experience in the next several months. This means that things will still linger on the lower end of the earning scale for a few more months before we finally see substantial positive results. The initial stages of the recovery will still be defined by several failures and business interests being pushed on the wayside. This bumpy and choppy condition in the real estate market is expected to persist for the next 18 months or so.
Looking at the upside of the prevailing conditions in the real estate industry, we are seeing some definitive leading indicators that tend to point that complete recovery is just around the corner. Experts are optimistic that things will again return to positive territory, and the worst case scenario is a complete recovery within 18 months.
Let us consider some important events in the real estate industry. There is a robust jump of 30% in housing starts that began in 2009. The sales figure for both new and existing homes also posted significant increase on a year to year basis. Home builders now see many reasons to be optimistic with the heightened level of activity in the home construction front. The only limiting factor that tends to mitigate what could have been a breakneck pace of activities within the sector is the tight credit standards which brought about the lower numbers when it comes to potential home buyers.
On the other hand, there are still lingering indicators that show that the trouble besetting the industry is not completely over. While there is already a significant shift from the dismal performance from the previous years, we are not yet expecting substantial improvement in as far as the bottom line figures for all sectors of the real estate market are concerned. The numbers posted by housing starts for the current year is expected to end as the second worst level on record, better only when compared to the worst figures posted during the previous year.
This is indicative of the fact that the market has already hit rock bottom. Our consolation amid this dismal condition is that subsequent movements will be on the upside. Further, sales performance will stay within the lower end of the performance spectrum. Figures will still linger within 30% below the high point of sales performance of about 8.4 million units way back in 2006. This means that despite the major jump in sales performance for this year, things will still be in negative territory.
Things will remain depressed in major real estate markets. While there was already complete reversal in the reported foreclosures and other distressed properties, this critical challenge will remain as a defining factor in the thrusts and priorities of stakeholders in the next 12 months or so. Another aspect in the real estate industry is the high figures that are still being posted in the sale of distressed properties. While this may indicate the buyers are now making a comeback, the above average figure being submitted is bearing down on the housing starts sales figures. In fact, housing starts account for 5% of the total home sales. This is 60% lower than the regular share of new home units under normal market conditions.