Job losses muddy outlook for U.S. housing comeback
MIAMI (Reuters) - A pickup in U.S. home sales has kindled hopes for a housing recovery, but plunging prices, rising unemployment and a new wave of foreclosures are clouding prospects for a quick end to the American real estate debacle.
"We're not at the bottom and anybody that's trying to call the bottom right now is crazy," said Jack McCabe, a real estate consultant based in Deerfield Beach, Florida.
"There's a huge foreclosure wave still ahead in the next 12-18 months and still a lot of excess inventory," he added.
Housing is at the heart of the 17-month-old U.S. recession and is key to a turnaround in the broader economy.
Optimistic observers have been talking about a real estate market strengthening as investors jump in to hunt for bargains.
But upbeat talk is undermined by data like the latest S&P Case-Shiller home price index, which recorded a 19.1 percent drop in the first-quarter compared to the same year ago period. It was the biggest decline in the index's 21-year history.
Nevertheless, the Realtor Association of Greater Miami and the Beaches said on Wednesday existing single-family home sales rose 98 percent in Miami in April from April 2008.
But the surge was fueled by a 39 percent year-over-year drop in median sales prices and many people in Miami -- which ranks among the poorest U.S. cities -- are among homeowners struggling to make ends meet as the U.S. unemployment rate heads into what may soon be double digits.
"I'm getting to the point where I'm ready to break down," said Martin Garcia, 48.
The medical laboratory equipment engineer has a prime, 30-year fixed rate mortgage with a 9.5 percent annual interest rate. Homebuyers with secure finances and high credit scores could qualify for mortgages with "prime" financing terms. But Garcia was laid off seven months ago.
He receives about $900 a month in unemployment benefits. But he is down to just $400 in savings and he won't be able to keep up much longer with the more than $800 a month in mortgage and maintenance costs he pays on the Miami Beach apartment he bought in 1989.
"Since I'm unemployed the banks don't want to refinance or do anything," Garcia said.
JOB LOSSES DRIVE FORECLOSURES
One in eight households with a mortgage ended the first quarter late on loan payments or in the foreclosure process, the U.S. Mortgage Bankers Association said on Thursday.
Foreclosures on fixed-rate mortgages, given to solid borrowers with good credit, represented the largest share of new foreclosures for the first time since the rapid growth and ensuing collapse of the subprime "toxic" loan market.
The jobless rate in Florida is currently hovering at 9.6 percent, double what it was in December 2007.
In Lee County on the state's southwest coast -- where the median cost of an existing single-family home has plunged more than two-thirds from a peak in December 2005 -- job losses have been a key driver behind a surge in foreclosure filings.
From April 2008 through March 2009, the county of less than 600,000 people saw the number of foreclosure filings jump from 20,544 to 45,150, or nearly 124 a day, said Jim Humphrey, mayor of Fort Myers, which is the county seat.
President Barack Obama pitched his economic stimulus plan during a visit to Fort Myers in February, highlighting its place in a region hard hit by the current recession.
The Cape Coral-Fort Myers area had the highest foreclosure rate in the nation last year, with 12 percent of housing units receiving a foreclosure-related notice.
Humphrey said "vulture" buyers were now swooping in to snap up bundles of homes at foreclosure auctions in Fort Myers. But given mounting unemployment, they could be hard pressed to find anyone to sell or rent the properties to, he added.
"We're seeing more sales, I'm afraid so much of it, if you look behind it, is vultures. And it's not really putting people in homes at this stage," Humphrey said.
Mark Zandi, chief economist of Moody's Economy.com, saw the mounting foreclosure crisis as the most significant threat to the developing economic recovery. He said that as foreclosures mounted, they undermined house prices, wealth and the viability of the country's financial system.
"The driving forces behind these foreclosures are millions of homeowners under water and surging unemployment, and/or underemployment. People won't default on their loan unless they're under water," said Zandi, referring to borrowers who owe more on their homes than the properties are worth.
"We're trapped in this very negative self-reinforcing cycle," he added.
Mike Larson, a real estate analyst with the Weiss Group in Jupiter, Florida, acknowledged that recent home sales gains in areas hit by the housing meltdown, including Nevada, Arizona and California, had come at the expense of pricing.
He said inventory was now clearing rather quickly in many areas, however, and predicted prices could bottom out sometime in mid to late 2010 as a recovery started to take hold.
"The outlook is a little more sanguine at this point. Not good; just not this all-bad situation," he said.
In Maricopa, Arizona, realtors Aziz and Deborah Farhat said the once booming real estate market less than an hour's drive from Phoenix peaked in October 2005. Back then, a three-bedroom home went for $225,000 to $250,000 compared to a current average of $99,000.
"At the moment it's flattening," Deborah Farhat said, adding that the price slide had started to level off in March.
"I'm not going to say it's turned as we're not going up in price, we're just slowing down the bleeding," she said.