Real Estate Outlook: Will 2012 See Improvement?
By Carla Hill 1
We've seen the effects of tight mortgage conditions over the last year. Existing and new homes sales have struggled and we are now left with sizable pentup demand. Will this trend continue into 2012?
For starters, consumer prices fell in October, meaning low wage workers and others struggling to make ends meet will find more affordability. Additionally, according to experts, this decline gives the Federal Reserve more wiggle room when it comes to policy making should the economy worsen.
Why the decline, which was not wholly expected? The recent developments in the European debt crisis have had their affects on American markets.
Yet, affordabilty is the name of the game for 2012. The National Association of Realtors reports that next year will be one of the best years on record for housing affordability.
"Housing affordability conditions, based on the relationship between median home prices, mortgage interest rates, and median family income, have been at a record high this year," said Lawrence Yun. "Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more home buyers to take advantage of current opportunities."
NAR President Phipps says that "mortgage availability remains a real concern since the private market has yet to return. While the housing market is still in recovery, we firmly believe that lower loan limits will only further restrict liquidity in mortgage
markets."
Home sales could start to see some improvement in the new year, though. Existing-home sales are expected to rise 4 to 5 percent.
"Once home prices turn positive on a sustained basis, consumer confidence will rise and help the broader economy to improve," Yun added. "If we could maintain sound and reasonable mortgage underwriting standards, the market would be able to
avoid a future big boom and bust cycle, but mortgage standards remain overly stringent."
While mortgage rates may rise slightly, they will still be near historic lows. In fact, the Federal Reserve is committed to keeping rates low through mid-2013.
The latest reports on the remodeling market show that today's low rates may be allowing stay put homeowners the opportunity to refinance and funnel extra funds into home improvements. According to BuildFax the remodeling market is up 34 percent
over September 2010. They report the top projects are roof remodels/replacements followed by deck and bathroom remodels.
Nearly two and a half years after the recession the economy and housing market continue to struggle, but recent stats and surveys are revealing that a change could be on the horizon for 2012. For now, affordability and interest rates are making for
tempting deals for today's buyers.
1 Carla Hill, M.A., works on the Realty Times staff as Managing Editor for our online publication. She also is Producer for the real estate news channel, seen daily on RealtyTimes.com and on video newsletters nationwide. She currently works out of the Realty Times corporate office and studio in Dallas, TX. Any questions can be sent to Carla at carladavis@realtytimes.com.
Reprinted with permission from the Realty Times Nov. 21, 2011
Copyright 2011 Realty Times. All rights reserved. www.realtytimes.com
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