Is U.S. Housing Making A Comeback Soon?

Housing, which led the U.S. economy into recession, may be one of the forces that helps to pull it out of the ditch. Although nobody expects a renewed housing boom, at least sales and construction spending are not falling any further.

Some of the signs of stabilization include:

• Home builders are gradually becoming more hopeful, even though surveys show most builders are still very discouraged. The builders' housing market index has risen in four of the past five months.

• Housing starts have increased in four of the past five months after tumbling to a postwar record low. Building permits for single-family homes have risen at a 109% annual rate over the past three months.

• Sales of new single-family homes have risen three months in a row after falling to a record low in March.

• Sales of existing homes have risen four of the past five months, supported by a government subsidy for first-time buyers and by sales of foreclosed homes.

However, residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the 2nd quarter, the highest percentage ever recorded!

Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.85% in the 1st quarter and 2.75% in the 2nd quarter of 2008

With current U.S. unemployment rate at almost 10%, it leads to the sign that mortgage performance is once again being driven by unemployment. In fact, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five. While 41 states had increases in the foreclosure start rate for prime fixed-rate loans, 43 states had decreases in that rate for subprime adjustable-rate loans.

Until the U.S. employment situation improves, it is unlikely that there will be meaningful improvement in the foreclosure and delinquency rates.

Data Source: MarketWatch