Is Real Estate Still in a Slump?

After the crash in the housing market, real estate was hit by the worst recession in our nation's history. Frankly, brokers took a beating and operated at a loss for a number of years. Since the low point, things have been steadily been improving.

There was a lot of speculation that the foreclosure volume in the hardest hit markets were clogging up the supply side. As we turned the corner, these distressed properties were slowly released into the marketplace and they were mostly absorbed. There was a two to three year heyday for brokers and agents who specialized in REO properties. Looking at the production of many of the REO specialists, that business has largely fallen back to normalized levels.

CoreLogic reports that the volume of "underwater" mortgages has been on a steep decline and is also returning to normal levels. That is pretty good news. It allows homeowners to trade homes without taking a loss. However, this is not opening up inventory levels for most areas of the nation. For many, inventory is still very low and that is having an impact on pricing. Home values have seen double digit increases, as supply has been so limited. That is expected to flatten out this year, largely because of affordability. Wages have not increased in line with housing values.

The biggest slump we see in the market is driven by expansion. The demand for homes is outgrowing supply by double digits in many areas like the San Francisco Bay area. People cannot find housing and there is not enough new inventory being built. Pacific Union held a housing summit in November 2015 that looked at the three year forecast for housing in the Bay Area – this was my chief takeaway. See more here.