Housing recovery? Don't bet on it

We're still a long way from clearing through the nation's supply of distressed homes.

By Kim Peterson Jan 3, 2011 1:24PM
Home insurance © Ingram Publishing/JupiterimagesMore bad news for homebuilding stocks today. It's going to take longer than we thought to clear through the nation's supply of distressed homes on the market.

Now it will take 44 months, according to Standard & Poor's. Previously, the firm had thought 40 months was enough time. Builders such as Toll Brothers (TOL), whose stock is down 15% since April 2010, are desperate to see that supply tighten up.

What changed? The housing picture worsened in the third quarter, S&P says. The volume of distressed properties continued to grow, and by the end, the principal balance of those homes surpassed $450 billion. 
That has created a huge shadow inventory, which S&P defines as homes in foreclosure or homes whose owners are at least three months behind on their payments.

S&P also looks at the housing situation in large cities and says the picture is especially bleak in New York. There it will take 10 years to clear through inventory, analysts said. That's twice as long as any other large city in the country. Post continues after video:
Miami, however, is looking brighter. That's the only large city to see the time estimate shrink to clear through distressed properties.

So how do S&P's figures fit with the supposed housing recovery that may be under way? Well, for every positive figure you see, there are about five negative ones.

Andrew Bond covers the conflicting views on housing well in a recent Motley Fool report. Take, for example, the 3.9% increase in housing starts in November. Sounds great, right? Well, until you read that home prices fell in October in all 20 cities tracked by the S&P Case-Shiller composite home price index.
There's also the fact that 288,000 homes were foreclosed on in the third quarter. That's a record high and 22% more than in the year-ago period.

Toll Brothers shares were rising Monday after the company reported a profit last week, breaking 11 straight quarters of losses, but the profit was mainly due to tax benefits, Bond writes.

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2Comments
Jan 4, 2011 3:37PM
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because even if they do refubish old homes there are areas such as mine which are growing rapidly and need new homes to allow the people to move into them. Some homes are in rough neighborhoods; no one will refurbish those.
Jan 4, 2011 3:11PM
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Instead of these builders starting new projects why don't they buy up existing homes in their area and refurbish them.  This seems like it would be a win win for everyone.  "New" isn't always better.  Just a thought.
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