Low Inventory Affects Housing Recovery

Latest housing-market reports are indicating that the housing recovery is being hit by low inventory which is resulting in a drop in sales. Low supply is blamed for a decrease of 1 percent in existing home sales in December, although sales were still at the secondhighest level since November 2009, according to the National Association of Realtors (NAR). They fell 4.34 percent in December to 101.7, although it was 6.9 percent higher than December 2011. New home sales in December fell 7.3 percent, but were 8.8 percent higher than December 2011, according to the Census Bureau and the Department of Housing and Urban Development. The housing recovery is being hit by low inventory...

Despite these numbers, total new home sales in 2012 were at the highest level seen in three years. These results are being blamed on the inventory of homes for sale, which dropped 8.5 percent from November and is at the lowest level since January 2001. With inventories down 21.6 percent from December 2011, rise in home prices is occurring as home sellers are receiving multiple bids for their homes. Lower inventory and higher home prices may be turning the housing market around to a sellers’ market, which may also make it difficult for some home buyers to qualify.

For the week ending Jan. 18, loan applications rose 7 percent on a seasonally adjusted basis and 8 percent on an unadjusted basis. The Refinance Index was up 8 percent with refinances accounting for 82 percent of all applications. Current 30-year fixed rates are as low as 3.125 percent, 15-year fixed rates are as low as 2.375 percent and 5/1 adjustable mortgage rates are as low as 2.375 percent. These low rates require that borrowers h a v e g o o d c r e d i t a n d qualifications that are necessary for approval.

As home prices increase, more homeowners will be eligible for regular refinance that require an appraisal. Under the HARP program, which is available for h o m e o w n e r s w h o a r e underwater and have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, an appraisal is not needed, in most cases, since loan-to-value caps were removed. Many borrowers who use HARP loans to refinance have been taking on shorter-term loans, which help to gain equity back at a quicker pace. HARP refinances are available until the end of 2013 and can be obtained by any participating lender.

Jobless claims, reported by the Labor Department, sent claims to a five-year low that has not been seen since late January 2008. The index of U.S. leading indicators, as reported by the Conference Board, increased 0.5 in December, which was the most in three months. Leading indicators is the outlook for the next three to six months and signaled stronger housing and job markets.