The USA Today is reporting that existing home sales rose in November as compared with October. This is an indication that our housing market may be slowly awakening from its long slumber.
The real estate recovery, however, will continue to move in a rather uneven pace for the foreseeable future. While demand has steadily improved since bottoming in July following the expiration of the buyer’s tax credit, other factors are driving the rather uneven real estate recovery.
For instance, the glut of foreclosed homes continues to drive down home prices and continues to hurt demand for new homes. To illustrate this phenomenon one only needs to look at the numbers for the homes sold last month. During that time period, foreclosed homes sold at a 15% discount as compared to non-distressed properties. In short, foreclosed homes were selling for less than non-foreclosed homes, and, as a result, driving down prices as a whole.
Because of the large inventory of foreclosed homes still unsold, many anticipate that real estate prices will continue to decline through most of 2011. Indeed, many are anticipating that banks will repossess one million homes in 2011, and that is on top of the one million homes they repossessed in 2010. These foreclosed homes will no doubt continue to drive prices down in 2011.
Another significant factor driving today’s real estate market is job growth. Many economists are predicting that the US economy will add close to 2 million jobs in 2011. Until the job situation is truly improved, however, the real estate market, and recovery, will remain rather uneven.
Additionally, many homebuilders anticipate that 2011 will also prove to be a very difficult year. This year proved to be one of the worst years for homebuilders in decades. However, many homebuilders are claiming that the groundwork for a recovery has been laid because of the historically low interest rates, low prices, improving consumer confidence, and anticipated growth in job creation.
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