The gradual rebound in the housing market is likely to continue this year, but strong gains in sales and prices are unlikely until unemployment falls below 6.5 percent, says Rick Sharga, executive vice president of Carrington Mortgage Holdings.
The jobless rate registered 7.8 percent in December.
On the plus side, the housing market has hit bottom, Sharga tells Newsmax TV in an exclusive interview. “We’re seeing a market that is stabilized and is in recovery,” he says.
“The number of sales is up, the number of pending sales is up, home prices are appreciating and the foreclosure activity is down.”
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On the minus side, “We do have to keep the recovery in context,” Sharga notes.
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“We’re looking at prices that have gone up quarter over quarter for a few quarters now, but we’re only back to 2003 price levels. So we’ve still seen roughly nine years of equity vanish. It’s going to take a while for us to come back.”
Overall, the outlook is positive. “All of the metrics are going in the right direction,” he adds.
The biggest hurdles faced by the housing market are high unemployment and a lack of credit availability, Sharga says.
“If you look at historical home sales, there’s an inflection point somewhere between 6.0 and 6.5 percent unemployment where home buying either goes up or goes down, and obviously the higher the unemployment rate the lower the home sales rate,” he explains.
“So until we get unemployment under control and under 6.5 percent, we’re not going to see a huge groundswell of new buying activity.”
Interestingly enough, the Federal Reserve has set a 6.5 percent jobless rate as the trigger that would lead it to begin lifting its nearly zero interest rate target.
As for credit availability, “right now, there’s no private money in the mortgage market,” Sharga states. That limits the financing available to back loans, “and a lot of people simply don’t meet the financial requirements to get those loans.”
Sharga believes home sales will total almost 5 million this year, “still a far cry from the peak we had a few years ago of about 7.1 million, but certainly better than the less than 4 million we sold a couple of years ago.” He sees prices rising 3 to 5 percent.
“These numbers will vary wildly from region to region, but what we’re seeing right now is home purchase activity that actually is almost higher than available inventory,” Sharga notes.
“So the lack of inventory is driving home prices, and because the market has turned and we’ve come off the bottom, a lot of people who were waiting for it to hit bottom before they bought have come back into the market.”
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