WASHINGTON — The housing market is weakening due to slower economic and job growth, along with other factors, such as low inventories and tight credit conditions that continue to stymie potential buyers, according to industry analysts.
"Most of the data measuring current conditions in the housing market have weakened recently," Wells Fargo Securities economists wrote in a recent report.
Even Texas, which successfully withstood the worst of the housing crisis, isn't immune to the downward pressure, according to the report. While the state has been among the strongest housing markets in the country over the past few years, the recent decline in oil and gas prices is affecting its housing market.
"Texas is not growing like it was," the report reads. For example, in 2014, single-family residential construction permits were up 8.6% from the year prior. Now, the annual rate is up only 6.5%.
Texas alone accounted for 15.7% of single-family housing permits in 2014, and Houston was the nation's top housing market by a large margin, according to the report. "Today Houston's economy is in recession."
New home sales tumbled 11.5% in September, according to the U.S. Census Bureau, and sales for previous months were revised downward. But it doesn't seem recent national trends are signaling a major retrenchment in housing activity.
"We expect housing to continue to improve in 2016, even if economic growth proves to be a little bit weaker than we were expecting," Wells Fargo Securities senior economist Mark Vitner said in response to emailed questions.
WFS economists estimate new home sales will total 530,000 by year-end, up 21% from 2014. And 2016 new home sales will be up 17%. They lowered their previous 2016 forecast by two percentage points.
"The latest new home sales numbers were troubling, however, and might reflect affordability issues in addition to unusually tight supplies," Vitner said via email.
WFS economists expect single family-family starts will hit 735,000 units this year, up 13.5% from 2014. They predict starts will rise 11.6% in 2016. "Overall, starts may be a bit weaker due to some additional hesitancy to build in Texas and declines in other oil producing areas," Vitner said.
Auction.com updated its housing outlook on Monday. "Challenges on both the supply and demand side appear to be slowing down existing home sales," said Rick Sharga, executive vice president of the Irvine, Calif.-based online real estate marketplace, in a statement.
"Inventory levels remain stubbornly low, especially for entry-level buyers, despite rising home prices, and credit is still very tight for the average borrower," he continued.
Existing home sales rose 4.7% in September to a seasonally adjusted rate of 5.55 million, following a 5% decline in August, according to an Oct. 22 report from the National Association of Realtors.
Auction.com expects October existing home sales will decline by 2% in October.
"The good news is that, considering the weaker-than-expected jobs numbers, and the usual dip in purchase activity, it doesn't appear that sales will be fall off significantly for the balance of the year," Sharga said.
Meanwhile, a new report by the Center for American Progress is a reminder that many communities have yet to recover from the 2007 collapse in house prices. And the report helps to explain why this housing recovery has been so slow.
The Washington think tank reported Monday that 7.5 million, or 15% of all homeowners, are still underwater and far from a full recovery.
"Close to 1,000 counties across the country present either stagnating or increasing percentages of underwater homes." There is, "still much work to be done in order for the market to fully recover," according to CAP director of housing policy Sarah Edelman, and senior policy analyst Michela Zonta.
Counties experiencing an increase in negative equity rates mostly are in non-metropolitan and rural areas, according to the CAP report. Meanwhile, underwater borrowers have a high propensity to default, which puts pressure on the availability of affordable rental units.
The authors recommend that government housing agencies consider "actionable steps" to prevent foreclosures and promote neighborhood stabilization. "Policymakers should implement specific policy interventions for the revitalization of rural areas experiencing increases in negative equity."