Despite the fact that key market indicators released in recent weeks have shown declines in home sales, anecdotal reports from real estate agents in the field suggest “better days are ahead for the industry,” according to commentary released Monday by the economic team at Wells Fargo Securities, LLC. Even builders – who’ve endured possibly the steepest drop-off in business over this downturn – are optimistic heading into the spring, the economists note.
As a result, Wells’ economic team has nudged its forecast for home sales slightly higher, as the spring selling season appears to have gotten off to a strong start.
“While employment conditions have clearly improved and consumer confidence and spending have risen, we remain concerned about the lack of real after-tax income growth.
That said, the anecdotal evidence is hard to dismiss,” the economists write.
Most real estate agents are reporting “significant gains in buyer interest and sales,” and these gains are organic rather than incentive induced, according to the Wells Fargo economic team.
Unfortunately, they note that conservative appraisals and tight mortgage underwriting continue to undermine a large number of deals, however, they “suspect that the undertow from these two hindrances will subside over the course of this year, as the fog surrounding shadow inventories lightens up a bit and more lenders come back to the market.”
Distressed transactions still make up a considerable portion of overall sales activity and will continue to pressure prices through at least the first half of 2012, they note in the report.
“We expect home prices to definitively bottom by the middle of this year, as the backlog of foreclosures finally begins [to] clear,” writes Wells Fargo’s economic team. “For properties not in foreclosure, prices have probably already bottomed, but should remain relatively low” given the competition from foreclosures.