Don’t confuse housing progress with a full recovery

Home prices have posted some of their strongest gains this year in nearly six years. But while prices have likely hit bottom, the public shouldn’t confuse that with a full recovery. A lot more still has to happen to get to that point, analysts say.

For one, inventories of homes for-sale need to reach more normal levels. The number of homes for sale is at an eight-year low, The Wall Street Journal reports. Prices are rising in many areas but it’s because “there are more buyers chasing fewer homes and fewer distressed homes, such as foreclosures,” The Wall Street Journal reports.

Also, millions of homeowners are underwater, owing more on their mortgage than their home is currently worth, which is preventing them from trading up and moving to a new home.

Home prices have been increasing at the fastest rate in markets that have some of the highest number of underwater homeowners because so few homes are for sale, according to The Wall Street Journal.

“While low inventories have helped firm up prices, they could also soon lead to year-over-year declines in sales volumes because there aren’t enough homes on the market to sustain the current sales pace,” The Wall Street Journal reports.

Other challenges the housing market still faces on its road to recovery include the stringent lending standards that are preventing many potential buyers from qualifying for a loan. Also, a large overhang of distressed mortgages has the potential to cause foreclosures to rise. Furthermore, if high unemployment across the country continues, it will put off rising home prices.