After years of tenuous signals, the U.S. housing recovery is now finally on better footing, according to Standard & Poor’s Ratings Services
Why is this time different? The most critical indicator is home prices, which increased 6.8% nationally in 2012 and which Standard & Poor’s expects to grow by another 8% in 2013–after having plunged more than 30% during the housing meltdown.
Robust sales activity, falling but still elevated delinquency and foreclosure sales, and higher homebuilding and housing stock prices are also key indicators that the sector is rebounding.
Shadow inventory (including seriously distressed properties, properties in foreclosure or owned by banks, but not yet on the market) is diminishing because of rising home prices, which are also pushing about 2 million more homeowners into positive equity positions. Price-to-rent and price-to-income ratios indicate fair-to-under valuation, meaning it’s still a good time to buy homes because affordability is high and homeownership is cheaper than renting.
Despite improving housing indicators, a full recovery will still take time before imbalances–both regionally and nationally–are corrected. One such imbalance is the gap between new and existing median home prices, which stands at 40%. In the long run, we would need to see existing median home prices rise to be consistent with historical 20% levels.