The ripple effects of housing’s fading rebound by Elaine Golden Gealer

A real estate agent shows a prospective buyer a home on April 22, 2014 in Coral Gables, Florida.

The housing rebound is fading. And it may be awhile before it gets a second wind.

Last spring, a surge in home sales boosted house prices—along with hopes that the 7-year-old housing bust was finally over. But after a bleak winter that depressed the entire economy, this spring is looking like a washout.

“Bargain prices brought out massive amounts of investment buying last year—which was not where demand usually comes from,” said Joel Naroff, chief economist of Naroff Economic Advisors. “When you had double-digit increases in sales starts and prices, the idea that would continue is unrealistic.”

Now, with prices leveling off and sales weakening again, there are rising concerns that the downturn could be more than a temporary winter slump.

On Wednesday, Fed Chair Janet Yellen warned a congressional panel that “the recent flattening in housing activity could prove more protracted than currently expected.”

For the last eight years, the economic recovery has been held back by the weakest housing recovery since the Great Depression. After sales of existing homes peaked at an annual rate of 7.3 million in 2005, a historic, four-year slide cut them to roughly half that level. Sales perked up in 2009 thanks to tax breaks for first-time homebuyers, but tanked again to new lows after the program expired in 2010.

Since 2012, a gradual bottoming of prices has helped spur a wave of heavy buying by investors—everyone from mom-and-pop landlords to hedge funds snapping up houses in bulk. Cash buyers still make up more than 40 percent of home sales, according to RealtyTrac.

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DRE #00598428
Senior Director, Coldwell Banker New Homes Division
With over 200 condominium, townhome and loft projects successfully marketed
“Fewer properties for sale with such remarkably low interest rates make it a great time to sell but a more difficult time to buy”