Why Hopes Are Up Amidst Foreclosure Listings
April 29th, 2009 by 
Joseph Smith
Optimistic economists and housing analysts are enumerating signs they see as portending the bottoming out of home prices and the subsequent start of recovery despite the reality of foreclosed homes listing.
One of the first signs they cite is the slowing decline pace of the Standard & Poor’s/Case-Shiller home price index for 20 large cities in the U.S. The index dropped by 18.6 percent in February compared to February 2008, less than the 19 percent drop in January.
The S&P/Case-Shiller price index is computed monthly, using home prices for the current month and the previous 2 months. This means that the February price index included home prices in December 2008 and January 2009, months when home price declines were worse.
Thomas Lawler, a Virginia-based economist who worked previously with Fannie Mae, said the February price decline rate would have been smaller if it used only data for February.
Another positive sign spurring optimism among some economists is the record rise in consumer confidence in April. According to the Conference Board, its consumer confidence index rose by a record percentage since 2005 to 39.2, its highest level in 6 months. The percent of consumers who hope there will be more jobs through the rest of the year increased to 13.9 percent, the highest it reached since June 2007.
Other factors that economists believe can overcome large numbers of properties in foreclosure listings are the decrease in mortgage rates, the recent rally in the stock market, the tax credit offered to first-time home buyers, increased loan modifications by lenders and efforts by states and nonprofits to mitigate the effects of overloaded foreclosure listings.
Increased sales of existing homes, including homes from foreclosure listings, are also increasing optimism. The National Association of Realtors said that low prices of properties in foreclosure listings have pushed up home resales in March. The realtors’ group also added that about 50 percent of all existing-home sales in March were sales from foreclosure listings and that over half of buyers of foreclosed homes were first-time home buyers.
Another sign of rising optimism amidst foreclosure listings is increased activity from the home building sector. Los Angeles-based KB Home is one of home builders seeing positive signs. The company’s losses in March decreased as it received more orders for the first time in 3 years.
