On the Bright Side, Housing Isn’t Getting Worse

By Nick Timiraos

Today’s housing data offer another a muddled view of the recovery. Here’s the good news:

On a monthly basis, existing sales fell by 1.5%, which is ho-hum, but they are still at a higher level than any month in 2011. At this point, housing isn’t getting dramatically better, but it’s not getting worse. It’s just bumping along at a significantly better pace than it was one year ago, and with fewer homes listed for sale, prices are going to firm up a bit more this summer.

Demand is up. Sales rose in many parts of the country compared with one year ago, fueled by investors but also low mortgage rates. Mortgage rates this week hit a new low in the Freddie Mac survey.

Supply is down. While sales are up from one year ago, the number of homes listed for sale is down sharply. In the near term, this will help firm up prices. Supply is down because many homeowners are underwater, or owe more than their homes are worth, and aren’t willing to sell.

Others think that prices will be higher in the future, and so they are waiting to sell. A Rasmussen survey today shows that 26% of homeowners think their homes will be worth more in a year, the highest share to say that in two years — so those would-be sellers are quite possibly waiting for prices to rise. Banks have also slowed down their foreclosure processes. Reduced inventory levels are becoming a headwind on sales, as the WSJ has reported.

But looking ahead, sales could begin to ease if consumers get frustrated by the lack of inventory. And that’s compounded by concerns over a weakening labor market and the European crisis.

Most of all, the report underscores just how dependent the market is on investors, who are looking for deals on homes and who are likely to pull back from the market as prices tick up. Until the job market strengthens, traditional buyers won’t be there to provide a more durable boost to demand.

-S. Mitra Kalita contributed to this report.