Just one week after Deatherage & Associates real-estate firm announced its disassociation with the Realtor brand, on Feb. 23 the National Association of Realtors' chief economist Lawrence Yun admitted that the Realtors had been overestimating existing home sales figures in their reports, thereby manipulating market expectations, which drive prices.

    Yun says that Realtors are still trying to quantify the extent of their error; but housing-data provider Core Logic is already making the claim that the Realtors overestimated 2010 home sales by nearly 1.5 million.

    Let's hope that the Realtors can straighten out the numbers quickly, so as to limit an increase in the distrust that the public already feels for the Realtor brand, which unfortunately could translate into a lack of confidence in the housing market as a whole. Confidence in the housing market is key to its recovery.

    Sales may not be increasing as hoped, but, there has been a recent irrefutable decrease in mortgage defaults. The improved underwriting that occurred after the 2008 market crash has resulted in a better-than-average quality of loans, and, as of fourth-quarter 2010, fewer Americans are falling behind on their mortgage payments than just before the recession began. According to the Mortgage Bankers Association's latest survey, the national mortgage-delinquency rate fell 10 percent in the fourth quarter of last year to 8.22 percent.



    Without another wave of foreclosures, perhaps the housing market can form a solid market bottom. The tide of mortgage defaults will remain stemmed as long as the current decline in home values and equity doesn't become severe. There is no way to predict whether this will happen. Unfortunately, home prices are already dangerously close to an official double dip, according to the S&P/Case-Shiller Home Price Index, released on Feb. 22.

    The home-buyer tax credit, which inflated home prices artificially in the first half of the year, resulted in a Fall hangover. Home values trended lower in the fourth quarter of 2010 by 2.6 percent, a 5.9 percent drop since the fourth quarter of 2009. If the housing market continues to lose value, many more borrowers will owe more on their mortgages than their homes are worth. Feeling drowned by their mortgages, these homeowners might decide that making payments is futile, and we could see another round of strategic defaults. Already, as prices dropped in fourth-quarter 2010, underwater mortgages took a huge leap, from 23 percent in the previous quarter to 27 percent, according to Zillow.

    Though banks are successfully preventing defaults by issuing mortgages to only well-vetted loan applicants, banks are also part of the reason that home prices continue to drop. Because they can't physically process but so many foreclosures at once, there is a backlog of distressed properties waiting to hit the market. This shadow inventory will continue to put a downward pressure on prices until these properties are marketed and sold.

    The future of the housing market depends on buyer trust and confidence. In a confident environment, buyers will get off the fence, en masse, and soak up the extra inventory, stabilizing prices. One way industry specialists can build buyer confidence, as I said in relation to the Realtor mishap, is by consistently providing accurate facts upon which buyers know they can make sound decisions.

    Buyer confidence is also directly tied to mortgage rates. When rates are low, so are monthly payments. Obviously, buyers feel more secure committing to lower, more manageable mortgages. Currently, banks are keeping interest rates at historically low levels. Fixed 30-year mortgage rates averaged 4.84 percent in the week, down from 5 percent the week before. Even though applications for home mortgages fell 6.5 percent in the week ending Feb. 25, according to the Mortgage Bankers Association, perhaps in the near future, prospective buyers will take notice of the low rates, excellent affordability and huge inventory and make their move.

    This article provided courtesy of our sister site: Beaufort County Now