The housing market has seen some significant leaps in the last year. Interest rates have been at an all-time low and housing affordability metrics are at an all-time high.
Yet, these two factors alone don’t confirm a supposed housing market recovery. There are still too many issues that contradict the much talked about housing rebound.
Outstanding household mortgage debt is still twice as high as it was in 2000. Moreover, one in five homes is worth less than the mortgage that was taken out to purchase it. If those facts aren’t enough to sway your perspective, here are more reasons the housing market recovery is a myth.
1. Large Institutions are Buying Homes
Image via Flickr by Images_of_money
One reason the housing market appears to have boomed is because institutional investors are scooping up millions of homes across the U.S.
This Spring, Forbes reported an increase in institutional investors in the Phoenix market from 16% back in 2011 to a whopping 26% this year.
In Miami last year, home prices increased by 11% but institutional investors accounted for an entire 30% of all those home purchases.
Due to an ever-growing number of inexpensive bank-owned houses, institutions are on a house buying rampage. As a result, statistics on home sales portray a false idea that home ownership is on the rise.
2. Foreclosures have Increased
How could the housing market possibly be at a state of recovery when foreclosures have increased to a rate of more than 200,000 a year? That’s an increase of 9% from April to May. Banks are struggling to get these homes back on the market and quickly sold. Yet, it’s not families buying the homes. It’s mostly institutions coming to the rescue.
Banks are faced with a steady increase of delinquencies every day. With foreclosures on the rise, home prices will continue to gradually decrease in the next few years. However, it’s important to clarify that no matter how many homes are being bought, foreclosure rates and a drop in prices do not constitute a housing market recovery.
3. Mortgage Rates are Unsteady
Although mortgage rates are currently extremely low, they appear to be gradually increasing. To affirm this fact, one must look at the facts. 30-year mortgage rates were around 3.4% in May, and now they’re over 4.5%. With inconsistent mortgage rates, new buyers will be more likely to reconsider entering the market.
For homeowners feeling uneasy about shifts in mortgage rates, there are at least some home ownership costs that refuse to fluctuate. Reliable and consistent homeowner’s insurance is one aspect that isn’t so stressful. Resources such as http://homeownersinsurance.com/homeowners-insurance-quotes.php can assist with home affordability.
4. The Unemployment Percentage is Still High
The labor market is still seeing its struggles. Additionally, the unemployment rate for college graduates remains very high.
Consequently, there will be fewer home buyers in the coming years which also negatively impacts the sector. Instead, young professionals and new families are renting to drop that hefty down payment and to cut the costs from unsteady mortgage interests.
In a perfect world, we could believe the skewed statistics. However, there are still too many signs signaling that the housing market recovery has yet to occur.
So what are your thoughts, is the housing market really on a recovery or is it all just hype to make it look good?