Reports show that new home building is slowing considerably. Building industry has been shedding workforce in thousands in recent years. There are limited new projects on the pipeline and only few approved projects starts. Some of the projects have stopped completely. It will take years for the building industry to recover and start building many new homes.
Although it is not a good sign overall, adding new homes to the housing inventory would not help house prices. There are a few signs that house price drop will come to stop in the near future. Many homeowners have given up on selling their home. Some have already refinanced their home mortgage in preparation for settling in their home for a while. Others have let their home and moved into another rental property due to relocation. Adding the slow new home building, these are encouraging signs for house prices.
Mortgage lenders are not rushing foreclosed properties on to market, either. Only a limited number of foreclosed properties are coming on to market. Should the lenders manage to phase out selling foreclosed properties, immediate pressures on prices will be eased. Some of those foreclosed homes might have to be taken down due to neglect, reducing housing stock further.
It might still take a few years before house prices make a meaningful upward move. Market might stall for a long time at the current lows before it starts improving. One of the main stumbling blocks is that mortgage lending is not getting any easier. Governments are trying to help homeowners with government backed mortgages. In the same time, regulators incline to move towards stricter lending that will reduce number of mortgage approvals. Stricter affordability tests and interest rate stress tests will make home loan borrowing a very hard task. There are only handful of brave souls planning to apply for a new mortgage and lenders are already very cautious. There is no need for the regulators to move in with new rules at least for the sake of housing market.
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