Yun suggests that builders need to really ramp up production in order for home sales to recover more.
Housing starts for single family homes in September were up 43 percent from a year ago and building permits up 27%, but the real volumes are still about half the normal level. New homes are popular with first-time home buyers, who are only making up 32 percent of the market, whereas they normally represent about 45 percent. That is due to still tight credit conditions.
(Read More: Is Housing Recovering as Much as Everyone Thinks?)
The biggest problem is that regular home sellers are not putting their homes on the market at a high enough rate to offset the drop in distressed volumes. Why? Part of it is still a lack of confidence in the market, but most of it that, as of August, about 15 million homeowners still owed more on their mortgages than their homes were worth, according to Zillow. That's 31 percent of homes with a mortgage. Negative equity and near negative equity is largely what is holding the market back now, even as distressed homes slowly move out of the system.
(Read More: Apartment Demand Ebbs as 'Avalanche' of New Units Open)
Given the huge drops in sales and inventory out West, which had been driving much of the gains in the overall market, some analysts predict deeper sales drops in the coming months. While sales of higher priced homes are up considerably from a year ago, they still make up a very small share of the total market. About 65 percent of the market is made up of homes priced lower than $250,000. These are a lot of numbers to digest, but they add up to a still bumpy recovery ahead for housing.
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