April 8th, 2013 10:23 AM by Nick Rapplean
Just in case you missed it, Fannie Mae (which was in the black last year for the first time in several years) very recently predicted a remarkable growth in sales of SFRs (single-family residences) this year and next growing 15.1 percent this year and 44.1 percent in 2014, [Inman News].
The Fannie Mae report declared, we expect home prices to firm further amid a durable housing recovery, continuing to boost household net worth, gradually diminishing the population of underwater borrowers, and reducing incentive for strategic defaults.
This is reminiscent of real estate analyst Ivy Zelmans bubbly enthusiasm in a fairly recent television interview: Im the most bullish I’ve ever been....Home prices could rise for another four to six years. She added something about the market having achieved real estate nirvana.
But let’s take a deep breath and a closer look.
While it’s very pleasant to wax rhapsodic about todays and tomorrows real estate market, I fear we could be too easily lulled into not seeing the many potential potholes ahead. And it could prove an unpleasant experience.
My inclination is to think that we need the rest of the economy to have fallen into place, and it hasn’t yet. We have, for example, a bit of a slowing among manufacturing orders, and among non-manufacturing orders (according to the Purchase Managers Institute. This could well lead to a slowing economy. Most important, it could cause borrowers to hold back, and new employment to lag.
Let’s say this again. The Fed, which has continued to ramp up the real estate market by buying massive quantities of mortgage-backed securities (MBS), creating a big market for longer-term bonds, is waiting to see growth of employment as proof that it can scale back its MBS buying. Until that happens, it has virtually promised us that it will continue its supportive MBS buying.
This is a double-edge sword. If employment truly improves, as it must if housing sales are to be as strong as Fannie Mae and Ivy Zelman predict they will, we will begin to see much better employment numbers first. And though the numbers (note the weekly claims for new unemployment insurance, for example) have generally been improving, were clearly not out of the woods yet.
Yes, we see the effects of pent-up demand driving sales to higher levels. But repeat with me: Were not out of the woods yet.
The other side of this coin, though, is that real estate sales are indeed improving, albeit slowly. Patience is still required, but the near-term real estate market seems truly worthy of a large investment of our time and our marketing dollar, to make sure we reap the rewards as the market continues to improve.
It’s a ticklish time, to a degree. But it always is, and real estate recoveries rarely come in paint-by-the-numbers kits. Keep at it, steering clear of excessive enthusiasm and even clearer of unwarranted negativity. The usual steady-aggressive-but-skeptical attitude should pull us through.