Real estate experts say the housing recovery has entered a new phase that has brought the housing market 64 percent of the way back to normal. According to a recent article by Forbes, the Trulia Housing Barometer reveals prices and existing home sales are close to normal. My family in Florida has personally experienced this third phase of the housing recovery because our home is 72 percent back to what we paid. We purchased it for about $180,000 and could now sell for about $130,000 or a little higher. However, I'm not expecting that my home will go back to its original value anytime in my lifetime.
Depending on broke first-time homebuyers
It's pretty evident to me that the housing recovery has stalled. Moreover, I don't think it will ever enter the fourth phase because a complete recovery depends on young adults moving out of their parents' homes and buying their own homes. As a parent of two young adult children, I know how difficult it is for young people in their late teens and early 20s to find full-time jobs that pay well enough to cover a mortgage every month. My children might not become first-time homebuyers until they are in their 30s or 40s because of the rough economy. They aren't in a rush to be tied down.
Racing against rising rates
Another factor that will hold back the housing market recovery is the rising interest rates. Most young people can't afford to pay higher prices for homes because of the added interest costs due to higher mortgage rates. Even though experts say the existing home sales leapt to their second-highest level in the past six years, I don't think that means sales will continue to jump. A lot of people were making a last-ditch effort buy homes before mortgage rates went up. Interest in buying homes could be fading as the interest rates rise.
Expecting a foreclosure loop
According to Trulia, the share of delinquent mortgages and homes in foreclosure dropped in July to 9.23 percent, which is the second lowest in 5 years. After touring some new home models recently, I was shocked by the high prices of new home construction. With the job market as shaky as it is in Florida, I can see my children's generation buying overpriced homes and dealing with underwater mortgages and foreclosure. While the delinquency and foreclosure rate might be 56 percent back to normal, it could just as easily head the other direction.
Fudging the debt-to-income ratio
Unless first-time homebuyers are fudging their debt-to-income ratio on their mortgage loan applications, it's unlikely they could get approved for expensive homes. The reality is most millennials have a massive amount of student loan debt. A lot of millennials never advanced in their careers because of the Great Recession so they don't have big salaries. They may work on a part-time basis or as independent contractors juggling different work gigs.
In my opinion, the housing recovery can't be sustained on the collective wishes of home sellers and Realtors who want to believe things will get better. Even if the economy truly recovers, young people including my children are just wary about buying instead of renting. We bought during the housing bubble and may never sell. Maybe the housing market is 64 percent of the way back to normal, but my children and a lot of other millennials are not even 10 percent closer to buying.
More from this contributor:Housing Prices Can't Rise Fast Enough
- Real Estate
- housing market