But the Toledo company’s chairman and chief executive officer says that if the housing market continues to improve like it has been, it could be enough to power the American economy for the next three or four years.
As the No. 1 Fiberglas insulation producer in the country and No. 2 seller of roofing materials, OC has been in a rare unique position to observe the fall of the housing market and its subsequent recovery.
Mr. Thaman discussed his “Thoughts on Housing Recovery” on Monday in downtown Toledo during a meeting of the Rotary Club of Toledo.
He said, “Owens Corning believes that the uptick seen in housing in the last six months is real.
According to industry projections, housing starts could rise from 600,000 to 1.5 million housing starts in 2015.
Average home prices in metropolitan Washington were up by double-digit percentages in three out of the past four months, and some have begun to wonder if they are heading toward unsustainable levels.
How can prices in some neighborhoods be back to where they were at the peak of the housing market? How can there be bidding wars again where potential buyers have to be prepared to make an offer — often with an escalation clause — at the open house? How can it be so difficult for a first-time homebuyer to find a house in her price range that is not too far from her job?
Are these all signs that we’re headed for another bubble here in the Washington area, even as much of the rest of the country is just beginning to feel recovery in their housing markets?
The short answer is no. At least not the kind of bubble we experienced in 2002 through 2006. A critical difference between the current market and the overheated market of the middle of last decade is the nature of the mortgage market.
Stricter underwriting standards have limited the pool of potential homebuyers to those who are most qualified and most likely to be able to pay loans back. The demand this time is based more closely on market fundamentals. And the price growth we’ve experienced recently is “real.” Or “more real.”
Prices aren’t up everywhere across the region. In parts of the District, Arlington and Alexandria, average prices have returned to peak levels. For some neighborhoods and product types, demand is high and multiple offers are common.
However, prices in many neighborhoods remain far below what they were six or seven years ago. Prices have been pushed higher in neighborhoods closest to jobs and transportation and where supply is more limited.
SACRAMENTO, Calif. — As the spring home-buying season gets under way, bidding wars are breaking out on Sacramento’s tree-lined streets.
People trying to land a house while prices and interest rates remain relatively low suddenly find few choices – and considerable competition.
There were fewer than 1,100 active home listings in Sacramento County and West Sacramento in February, according to the Sacramento Association of Realtors.
That is less than a month of inventory, meaning it would take that long to sell all the houses. A healthy real estate market has about a six-month supply of homes for sale. Three months or less is considered a seller’s market. A month’s supply is almost unheard of.
“It’s the ultimate seller’s market,” said Chris Little, president of the local Realtors’ association.
The lack of homes on the market is leading to multiple offers, fast sales and offers above the asking price in some of the region’s more desirable neighborhoods.
Real estate tracker Zillow estimated this week that area prices rose by more than 15 percent in February compared with the same month a year ago.
It’s frustrating for buyers, great for sellers, but unlikely to last, experts said. Eventually supply will catch up and slow the surge in prices.
“I think we’ll see a gradual uptick, a natural movement of people, and then hopefully it will continue to build as people feel more confident,” Little said.
For now, however, a variety of factors are creating a bottleneck in the supply pipeline. Builders, who have only recently started to ramp up, could take months to get new homes built.
At the same time, more than 150,000 homeowners in the region still owe more on their mortgages than their homes are worth – making it difficult for them to sell without taking a loss. Others are worried about their jobs or finding a replacement house. Many are waiting for prices to rise further.
The number of listings has increased only slightly this month compared with February, said TrendGraphix, a Sacramento-based real estate information service. Yet experts say the supply constraints will gradually ease, adding more homes to the market and curtailing upward pressure on prices.
It’s as simple as the law of supply and demand.
“As we elicit more and more supply response, the rate of price increase will moderate. There’s no question about that,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate. But, he added, “I think in the short run, there will be nice upward movement of prices in Sacramento.”
Sellers have been finding that out first-hand.
Home mortgage debt fell to $9.4 trillion at the end of 2012, down from a record of $10.6 trillion in 2008, Bloomberg reported in an article.
According to data from the Federal Reserve, the amount U.S. households have in bank deposits, savings bonds, fixed-income mutual-funds and municipal securities increased $500 billion last year, totaling the most since 2007.
The significant decrease in mortgage debt reflects foreclosures, lower property prices and tighter credit, the article says. Since the collapse of Lehman Brothers froze financial markets in 2008, consumers have pulled back on taking out home loans.
Instead, people funneled $1.04 trillion into Treasuries last year, opposed to only $648 billion in 2011, the article reports.
Michigan foreclosures are finally showing a slow steady drop, an MLive article reported. The state recorded 74,000 foreclosures between 2011 and 2012, ranking the third highest in the country.
“Michigan was hit earlier and harder and it is taking us longer to recover,” Neeta Delaney, the director of the Michigan Foreclosure Task Force said. “Since the beginning of 2005, due to the crisis, Michigan has lost half-a-million homes and that’s nearly twice as many homes that were lost in Katrina.”
She added nationwide the number of mortgage foreclosures has decreased, but it’s taking Michigan longer to catch up with the unemployment rate still high.
Investors have always played a role in the housing market, but their presence was often small. Currently, cash buyers—largely investors—make up about 32% of sales nationally, according to the National Association of Realtors.
Worried about predictions of rising mortgage rates, additional increases in home prices and new costs for FHA borrowers, first-time homebuyers are kicking off the spring buying market in years, despite skimpy inventories and late winter weather across much of the nation.
According to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, first-time buyers accounted for 34.5 percent of home purchase transactions in February based on a three-month moving average, the second monthly increase for first-time homebuyers.
First-time homebuyer traffic surged in February. The HousingPulse Homebuyer Traffic Diffusion Index for first-time homebuyers, an indicator of future home purchases, hit a four-year survey high of 66.4% in February. Any score above 50 percent with the index reflects an increase in home shopping traffic.
“First-time homebuyers are the wildcard in the upcoming spring-summer homebuying season,” said Thomas Popik, research director for Campbell Surveys. “We see strong first-time homebuyer traffic, but it’s still not clear that the traffic will translate into increased purchases, because first-time homebuyers are dependent on low-downpayment financing, such as FHA mortgages, and announced FHA program changes will take effect this spring.”
In the April to June timeframe, FHA will be increasing its Monthly Insurance Premium and require payment of the MIP for the full term of the loan.
While first-time homebuyers represented the fastest growing category of home purchasers between January and February, purchases by current homeowners saw the biggest drop fell from 44.3 percent to 42.5 percent. That was the lowest market share for current homeowners recorded by the HousingPulse survey since last June.
The Campbell/Inside Mortgage Finance findings are similar to data released by Realtor.com last week that suggests buyers are getting an early start this year (See Early Bird Buyers Try to Beat Tight Inventories).