Home foreclosures decreased dramatically in 2011, but industry experts are cautioning that this is not a reflection of improvements in the housing market, but a result of legal, process and “robo-signing” issues. At the 2012 International Builders’ Show in Orlando recently, Ed Sullivan, chief economist for Portland Cement Association, said that the 1.9 million foreclosures reported in 2011 is understated by more than 1 million due to the processing delays.
“Despite small improvements to the economy in 2011, the underlying fundamentals of the mortgage market have not improved,” Sullivan said. “Instead, we are seeing bank processing delays that are pushing foreclosures into 2012 and maybe even 2013. This is resulting in excess housing inventories and continues to drag down housing starts.”
Sullivan expects 443,000 new single-family housing starts in 2012, a three percent increase from 2011. However, even with significant gains following in 2013 and 2014, it will take until 2016 for the housing industry to be back to 2002 levels. “The current ‘visible’ housing inventory vastly underreports foreclosure inventory that must be burned off. Adverse implications for months of supply calculations and home price delay signals to homebuilders to increase activity and puts off recovery.”
Multi-family housing, according to Sullivan will recover much sooner than single-family residential construction. He reported a 55% increase in multi-family construction in 2011, followed by double-digit increases in 2012 and 2013. The recovery will be led by increased demand for rental units and an easing in lending standards for this sector.