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Signs of Revival, Slight but Sure, for Home Sales

Analysts are hailing the beginnings of a recovery in the nation’s housing market. But to beleaguered homeowners, it will not feel like much of one for many months to come.

Home Sales
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Home Sales

The number of existing homes sold rose 2.3 percent in July from the previous month, according to figures released Wednesday. Volume was up more than 10 percent from a year ago.

For several months, economic data and accounts from real estate agents across the country have calmed fears that the overall market could take another big step down, giving prospective home buyers some assurance that prices were stabilizing.

Yet the nascent recovery is still a convalescent one, with the pace of activity uneven and far below the levels reached before the bubble burst. Home pricesremain under pressure in many markets.

In fact, Wednesday’s report from the National Association of Realtors showed that average sales prices actually dipped slightly from June to July. This seeming contradiction — increasing demand but anemic growth in home values — could represent a new normal in the housing market, experts said.

Real estate agents across the country cited the weak job market, stagnant wages and tight lending standards as continuing restraints on prices, despite pent-up demand and mortgage rates near record lows.

Even relatively optimistic observers like Michelle Meyer, an economist with Bank of America Merrill Lynch, foresaw only gradual improvements in home values. She expected home prices to rise 2 percent annually in 2012 and 2013, with momentum gradually increasing later in the decade. At that rate, the average home price would regain its 2006 peak in 2022.

“Inventory is lower and construction is incredibly depressed,” she said. “But it’s bumpy. We could see prices weaken slightly in the fourth quarter of 2012 and the first quarter of 2013.”

Joe Abbruzzese, a retired farmer from upstate New York, was in southwest Florida this week bargain hunting for a second home. “I wanted to get down here before the snowbirds arrive,” he said. He was looking at five or six properties in the low- to mid-$100,000s before he left New York, but by the time he arrived in Florida only one was left.

Mr. Abbruzzese said that while prices had increased in recent months, he was betting that they would rise still more after the presidential election restored some certainty to the country’s political course. “I think people are really scared right now; they’re not spending the money,” he said.

While new buyers might take comfort in the fact that deep declines in home values seem to have passed, more than 11 million current homeowners owe more on their mortgages than their homes are worth. In July, home sales were running at an annual pace of 4.47 million, an improvement over a year ago, but well below the high of 7.25 million reached in September 2005.

New-home sales also were picking up, lifting share pricesfor many home builders. On Wednesday, Toll Brothers reported a sharp rebound in profits, lifting its stock 3.8 percent.

A number of factors have helped nudge prices higher, including shrinking inventory — particularly on the more affordable end of the market. There is about a six-month supply of homes, according to the Realtors’ group, down from more than nine months last summer.

In California, the supply of houses has become so slim that agents protested a bulk sale of 500 foreclosed houses by Fannie Mae, the mortgage giant, saying there was no need to sell the homes at a discount to investors when there were retail buyers willing to buy them. (Most of the properties would not have been sold individually because they were occupied by renters.)

Concerns that a flood of distressed properties will soon hit the market were also receding.

Banks have been taking more aggressive measures to avert foreclosures, which have been declining for almost two years, according to RealtyTrac. Short sales, the practice of allowing homeowners to sell their property for less than they owe before the home reaches the auction block, are on the rise. Some banks have recently introduced “deed for lease” initiatives to convert delinquent owners into renters instead of evicting them.

Sales of distressed properties, which act as a drag on prices, represented 24 percent of all activity, down from 29 percent a year ago.

“The broad opinion is that housing is definitely improving and on the upswing,” said David Blitzer, the chairman of the index committee for S.& P.’s Dow Jones Indices, which produces the Case-Shiller Home Price Index. “And that is a positive factor for the economy as well.”

In some areas, real estate brokers were skeptical that any improvement would be sustained.

Michael Parra, a real estate agent in Las Vegas, said investors who had been fueling the market with cash purchases were starting to get cold feet, fearing values would not appreciate further as long as incomes lag and jobs are scarce.

“You’re going to have a catfish market,” Mr. Parra said. “You know, catfish stay on the bottom and they occasionally jump up to the surface.”

Economists like to caution that there is no such thing as a national real estate market. Results vary widely from place to place, and some of the biggest increases in prices have come in parts of the country hit the hardest when the housing boom turned to bust.

Home prices in Phoenix fell 55.9 percent from June 2006 through September 2011, when they bottomed, according to the Case-Shiller index. Since then, they have risen 8.8 percent. And in San Francisco, which had a 46.1 percent decline, prices have recovered 10.6 percent from the low in March 2009.

More typical is Chicago, which hit a low in March 2012. Prices there have risen 1.1 percent since then. Case-Shiller is still showing a slight decline nationally in average prices over the past year, but analysts will be closely watching data due out next week for signs of a turnaround.

Barbara Gargiulo, a real estate broker in northern New Jersey, said market conditions in her area varied widely. Montclair, she said, has only a two-month supply of houses on the market — far less than some of its neighbors.

Still, she said, a house that sold last year for $620,000 sold again this year for $650,000, above its list price.

“I think we’ll have some small little peaks, small little valleys, but in general we’ll see an upward curve over the next few years,” she said.

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