Strong Housing Predictions for 2012

What’s in store for housing markets in 2012? Well, the good news is, we may finally be over the worst, according to the authors of a new Kiplinger article.

Following five long, often painful years of price declines, which saw median home prices drop by almost 40%, housing is finally showing signs of a rebound – although we still have some way to go.

Things are looking better for real estate in 2012.

The Kiplinger article made a number of predictions for housing over the next 12 months. One of the most important of these is that home prices are expected to stabilize. Although Mark Zandi of Moody’s Analytics is predicting that home prices will drop by a further 3% to 5% nationwide, he also claimed that in around 12 months time things will finally stabilize, before we finally start seeing some gains in 2013.

Housing affordability is also expected to grow higher. Housing affordability is worked out according to the ratio of median home prices to median family incomes, and this is likely to remain at the current record levels we are seeing now. The article in Kiplinger notes that many homes across the US are “substantially undervalued”, and predicts we could even see a mini-bubble in places, with some areas seeing prices rise by as much as 10% to 15% in a given year.

One factor that will help keep houses affordable is low mortgage rates, which are set to continue where they left off in 2011 – at record low levels. 30-year fixed rate mortgages have been hovering under 4% for quite a few weeks now, and Kiplinger predicts this will stay around the 4% to 5% mark throughout 2012.

We may also finally start to see some more sales. While we still have huge inventories flooding many local markets, the big slow-down in new homes has led to a gradual easing of surplus inventories, something that should lead to an increase in existing-home sales.

If you’d like to read the Kiplinger article, you can find it here.