Housing Market Isn't Halfway to 'Normal,' Trulia Barometer Says

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Despite data that's emerged over the last six months pointing toward a real estate recovery, Trulia recently found that the current market is not even halfway back to what the online listing service considers to be a normal state, and probably won't fully stabilize until 2015.

Trulia's Housing Barometer, which gauges the state of a real estate market recovery based on a few key metrics, found that the housing market has progressed just 34 percent of the way toward a complete recovery.

"How long will it take us to get there?" Trulia chief economist Jed Kolko writes in a blog post about the new report. "Kids, sit tight.... it's going to be awhile."

The monthly report, which Trulia debuted today, combines statistics from construction starts, existing home sales, and the combined delinquency and foreclosure rate to place it on a housing health spectrum. Its two endpoints range from one that shows the housing market's nadir to another that characterizes a stable market.

The report will use each month's new numbers to pinpoint the housing market's position on the spectrum, and chart its progress toward recovery. If the market moves at its current pace, it will not fully recover until 2015, the report found.

Kolko told AOL Real Estate the combined default and foreclosure rate, which reflects the percent of homes in default or foreclosure, is particularly illustrative of just how far off stabilization remains. He said that in a normal market the combined rate should be around 5 percent, but that currently it's at 11.7 percent.

Still, the Housing Barometer shows that the market has made significant strides in the last year, rising 18 points due to improvements across the housing sector.

Home sales had risen by 13 percent in the last six months as of February, according to Capital Economics, while the delinquency rate saw a year-over-year 14 percent drop as of February, according to Lender Processing Services. Homebuilder optimism is at a five-year high, and real estate agents' optimism more than doubled in the first quarter of 2012, against the backdrop of positive market indicators.

The most recent data suggests a slight slowdown in the momentum that seemed to have been building, but still reflects significant year-over-year gains. One recurring buzz-kill is an unceasing decline in home prices, most recently recorded by the latest S&P Case-Shiller Index, which found that January 2012 home prices were 3.9 percent lower than January 2011's.

CoreLogic senior economist Sam Khater said the number of homes in delinquency or a state of foreclosure has leveled out after a period of improvement, and is unlikely to begin to decline again in the immediate future, due to the recent settlement reached between the government and major mortgage servicers. The $25 billion settlement, which resolved an investigation into foreclosure abuses, has clarified acceptable foreclosure practices for banks.

"The end result of that is that will renew some of the downward pressure on home prices," Khater told AOL Real Estate. The current inventory of homes in some state of foreclosure, known as the "shadow inventory," is 1.6 million, according to CoreLogic.

The price decline has some industry observers calling for Americans to reshape their view of what constitutes a normal housing market. Budge Huskey, president and chief operating officer of Coldwell Banker Real Estate says the next housing era will be a more "traditional market," and will contrast with the "steroid years," when prices rose at an unsustainable pace.

Homes today are more affordable than they've been in the last 40 years, but that could change soon: Interest rates are finally increasing, and home prices are generally considered to be somewhat close to bottom. National Association of Realtors chief economist Lawrence Yun, in fact, predicts prices will rise by 2 percent in 2012.

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