New home sales are up 24% year-over-year and existing home sales have risen 11% driven by “institutional investor interest in single-family residential properties as an asset class, pent-up demand returning to the market, and increasing consumer confidence in housing.”
The supply of housing is being constrained by negative equity, and CoreLogic pegs the percentage of underwater mortgages at 45%. Because a large portion of home buyers are already homeowners, the impact of negative equity prevents them from putting together a 20% down payment for a cheaper loan and drives them to more expensive loans. That is a strong disincentive to jumping into the real estate market according to CoreLogic.
The research firm also notes that month-over-month growth in home prices is tapering off, falling by 0.3% in August, with a similar decline expected in September, followed by an expected drop of 0.6% in October. CoreLogic predicts larger declines in November and December, which is not too surprising given that fall and winter are not traditionally strong seasons for home sales.
Still, house prices are expected to show a 5.5% gain in 2012 based on the rise in home prices that were made between February and May of this year. The strength of those gains will not be wiped off the board by weakness in the last part of this year.
Paul Ausick
Contact [email protected] for any questions or corrections.
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