|
|
Home Buyers Find Bidding Wars Again
Home buyers nationwide are being caught by surprise as the spring selling season swings into high gear. Bidding wars are back!
Many buyers are finding themselves competing for the same house. Unlike the bidding wars of the past, these recent bidding wars are the result of a shortage of inventory.
Sellers, meanwhile, are not seeing huge price increases or hefty profits, like some did during the boom years when prices were going through the roof. Competitive bidding in this current enviornment is being caused by tight inventories. More evidence that housing demand is starting to pick up again after a six-year slump.
According to a Wall Street Journal quarterly survey, the inventory of homes listed for sale declined sharply in all 28 markets they track. At the height of the housing crisis in 2008, there was an 11.1 months’ supply of home for sale. In March, there was a 6.3 months’ supply. Real estate agents normally consider a market to be balanced when there is a six month supply of homes for sale.
An index recently reported by the National Association of Realtors measuring the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago, and 4.1% from February.
Market inventory varies in different parts of the country, but the general consensus nationwide is, the number of houses for sale is edging down.
Inventories seem to be declinging for several reasons. Some sellers have taken their homes off the market to wait for prices to increase and market conditions to improve. Investors, meanwhile, have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by anxious sellers.
Improvements are obviously investments in your home, and most homeowners have a list of things they’d like to do to their home to make it their dream home. Things like: gutting the kitchen, reconfiguring the bathroom or repainting the entire outside of the home.
Some economists say inventory levels are artificially low because Fannie Mae, Freddie Mac, and the nation’s largest banks have been slow to list hundreds of thousands of foreclosed homes they own. Lenders slowed down the foreclosures after record-keeping abuses came to light 18 months ago.
If those same banks and lenders step up their efforts to unload their properties, inventories could quickly rise, putting pressure on prices again.
Even with bidding wars popping up again, pushing prices higher in some areas, many homes are still selling for prices much lower than they were a few years ago. Meanwhile, rents are rising at a time when mortgage levels have fallen to or near record lows. Many renters are finding rates so low they can now afford a house that was out of their price range just a year or two ago.
Housing markets face another danger. More than 11 million homeowners owe more than their home is worth, causing the trade-up market to completely stall. When homeowners can’t sell their home, let along come up with the down payment for their next home, move up buying tends to dry up.
Mortgage lending standards remain very tough. Many “deals” fall apart because homes won’t appraise for the price buyers have agreed to pay, and sellers are not willing to come down even more than they already have.
.
.T
Mortgage Rates Remain Near Record Lows
Mortgage rates have dipped to near record lows again, keeping home buying and refinancing very affordable.
Last week, mortgage buyer Freddit Mac reported the rate on the 30-year fixed rate loan had dropped to 3.88%, down from 3.9% a week ago. The rate hit 3.87% back in February, the lowest long term mortgage rate in history.
The average on the 15-year fixed rate mortgage dipped to 3.12%, down from 3.13% the previous week. The national average hit an all-time low of 3.11% just two weeks ago. Average rates do not include extra fees, aka points, which most borrowers have to pay in order to get the lowest rates. One point equals 1 percent of the loan amount.
So far, record low mortgage rates have done very little to boost home sales. Analysts suspect that a record warm winter may have something to do with that, as many sales that would have normally taken place during the spring buying season, actually took place in January and February.
.
.
Spring Cleaning For Your Finances
With Spring in full force most everywhere now, and tax season once again behind us, now is a good time to do some “spring cleaning for your finances” to help you eliminate some of the paper clutter, and get better organized.
Here are some tips on Spring Cleaning for Your Finances and your office record keeping…
We welcome your comments and suggestions below.
|
|
Home Improvements That Still Pay Big Returns
Home improvements are obviously investments in your home, and most homeowners have a list of things they’d like to do to their home to make it their dream home. Things like: gutting the kitchen, reconfiguring the bathroom or repainting the entire outside of the home.
The key to home improvements is doing them wisely. You don’t have to spend a ton of money to add value to your home when it comes time to sell it.
Home Improvements With the Biggest Return on Investment
The National Association of Realtors (NAR) and Remodeling Magazine recently released their 2011-2012 Remodeling Costs vs. Value Report.
Exterior renovations dominated the list of the most cost-effective projects, those expected to recoup close to 70 percent of the cost.
1 – Siding replacement is already part of long-term home maintenance, but upgrading to fiber cement siding replaced the previous number one remodeling project of replacing exterior doors.
2 – An entry door replacement pays for itself. Replacing a wood door with a strong steel door not only pays for itself with cost recovery when you sell, but adds safety and security to your home while you’re still living there.
3 – An attic bedroom addition, although not for everyone, adds value to your home, and is considered one of the least expensive ways to add another bedroom, without adding on to the existing structure.
4 – Replacing old worn out garage doors jumped on the list this year, mostly due to the cost of doing so dropping about 15 percent from last year.
5 – Window replacements are definitely a long term investment. Replacing old wooden windows with newer vinyl models will help you save on utility bills, and you’ll recoup some of that investment when it comes time to sell your home.
New Attitude About Home Improvements
Many homeowners don’t fret over paybacks from home improvements. Most owners want assurances that their renovations will enhance the property’s market value, but expectations of 100 percent return on their money is no longer there.
Most people are happy with modest returns. For many consumers, fixing up their house now fits their sentiments — and their finances — far better than selling or buying. Useful enjoyment of their home improvements now seems to outweigh the old “how much will we recoup from these home improvements when we sell?” mentality..
.T
Appraisals: What They Mean For Your Mortgage
Appraisals are more important than ever before when it comes to determining the value of a house.
You’ve heard the scenario: You find the home of your dreams, you’re already pre-approved for a mortgage, closing is all set, then, a low appraisal comes in and the deal is off.
Even though some of the tough mortgage standards have been easing up in recent months, getting an appraisal for what the house needs to be in order to make your lender happy, has not eased.
If a buyer signs a purchase agreement to buy a $250,000 home, but the appraisal only comes in at $220,000, the lender will only agree to finance on the lower value, not the purchase price. It’s up to the buyer to come up with the rest, or find another house.
Banks are the main reason appraisals are coming in low. If they end up having to repossess a home (short sale or foreclosure), they don’t want to be stuck with a a home that is worth less than the mortgage.
Are Banks Dictating Appraisals?
Lenders are not telling appraisers, “We want you to come in low”, it’s more like, “We want you to account for everything…” and many appraisers hear that and overcompensate on the low side.
There’s even a box on standard appraisal forms indicating “declining value”, which indicates falling home prices in that market. Banks will then cut another 5% off the loan just to protect their investment.
Any Options After a Low Appraisal?
One path buyers can take if a bad appraisal is about to kill their purchase is to renegotiate the sale price of the home. Often times, once a seller sees their home appraised for less than the sales price, they will agree to lower the price to save the sale. Low appraisals will only carry forward to the next potential buyer anyway, so it may be to the seller’s advantage to come down on their price and get the deal done now.
So don’t let a low appraisal mean the end of the road for your home purchase. Talk to your agent about renegotiating with the seller to see if anything can be done to help you still get that dream home..
.
Home Prices Rising: Three Straight Months
Home prices rising means good news for the economy, or so everyone thinks.
Standard & Poor’s closely watched Case-Shiller index declined in January for the fifth straight month, but according to John Burns Real Estate Consulting, that news doesn’t reflect what’s really happening in the market right now.
The independent research company conducted its own analysis of home prices in 97 markets and found that over the period of January to March, prices were up in 90 of those 97 markets by an average of 1.1 percent, or 4.5 percent annually.
One of the reasons many industry indices still shows a picture of gloom and doom is because most home indices are on a three-month lag for reporting.
JBREC’s “Burns Home Value Index” calculates home values based on prices that are set at the time purchase contracts are negotiated and signed. Nearly all other indices are based on when the transaction closes, which can lag 2 to 3 months behind contract signings.
It is current because it uses what is happening in MLS databases all over the country, as well as some leading indicators the research firm has determined are reliable.
JBREC has calculated BHVI index values for the United States and 97 major metro areas, with history going back to January 2000.
|
|
Tax Withholding: Should You Change Yours?
With tax season now in full swing, many tax and financial experts are encouraging taxpayers to review their 2012 withholdings now, as it may be that, due to economic conditions, taxpayer’s income may be reduced due to layoffs or cutbacks on the job.
Essentially, this means, you could be having more tax taken out of your pay than you will be liable for at the end of the year.
Most workers have their employers withhold taxes from their paychecks. If you correctly fill out the W-4 Form that your employer gives you, then the amount taken out of your paycheck should be enough to avoid any interest and penalties.
Typically, as long as you owe less than $1,000 in tax after you account for withholding and tax credits, you’re in the clear. Also, if you paid at least 90% of the tax you owed in the current year, you usually won’t get hit with a penalty.
The following circumstances should prompt any taxpayer to adjust his W-4 Form to lower both his federal and state withholding taxes:
1. A taxpayer or his spouse has been laid off in 2011 or 2012. Usually, when both spouses are gainfully employed the taxpayers tend to increase their W-4 withholdings. The loss of the job for either of the spouses could be reason enough to reduce the federal and state tax withholding by claiming the maximum allowable exemptions.
2. Taxpayers whose spouse’s own and operate a business may have in the prior years increased their federal and state withholdings at their regular job to ensure they meet the income tax obligation from their spouse’s business profits. However, for the tax year 2012 the profits from their spouses business may have either been eliminated or substantially reduced. These taxpayers might find it prudent to file a new W-4 Form and drastically reduce their federal and state income tax withholdings to reflect the reduced tax liability from the spouses business.
3. Taxpayers who have recently had a baby or claiming elderly parents as dependents may also find that they are entitled to additional dependent allowances. Thus, they should consider filing a new W-4 Form to reflect the additional dependent allowances the taxpayers are entitled to claim on their tax returns.
4. Taxpayers who have sustained substantial capital losses in the stock market are entitled to deduct up to $3,000 of the capital loss against their salary and other ordinary income. These taxpayers may be entitled to claim an additional withholding allowance.
5. Taxpayers faced with reduced taxable income due to a salary reduction, the taxpayer might find themselves being placed in a lower tax bracket. Both these factors would entitle the taxpayers to reduce federal and state income tax withholdings by claiming additional allowances.
A taxpayer’s previous strategy of overwithholding so as to plan for a tax refund may not be a smart idea for 2012 if you’re faced with an extremely difficult time meeting your current financial obligations. It’s better not to use credit cards or lines of credit to fund your current obligations and instead, increase your paycheck by maximizing your dependent allowances you are legally entitled to by the IRS.
.
.T
Spring Lawn Care Advice
When March arrives, a lot of people start thinking about their lawns. Some think, “oh no, here comes mowing season again…. work, work, work.”
Others relish in the fact that winter is almost over and the grass will start to turn green again soon.
Our advice… “Don’t work harder. Work smarter.”
That is an adage from the business world that is also pretty good advice about how to approach the management of your lawn. We can do all the right things by buying good tools, quality fertilizers and weed killers and setting aside time each weekend for lawn maintenance. But along with devotion, some wisdom about how to go about the art of lawn care is necessary to be successful.
A good example is how you use your lawnmower. Just rolling it out of the box and starting to mow is not the smart way to use this tool. You must adjust it and use it purposefully so each mow accomplishes the goals of the season your yard is in.
For example, in the early spring after the yard has sat idle for several months, it is a good move to bring the mower out and put it on the lowest setting and mow a lawn that is not active. It seems silly but “scalping” the grass removes the extraneous material from the grass seedlings as well as cleans the soil around the grass to make early growth more effective.
As the season continues, keep raising the height of the blades every 3-4 weeks until you are finally leaving your grass blades standing about three inches tall. This may seem like a shaggy grass but if you mow faithfully each week, it will be long, but well-groomed. The general rule is, the depth of the roots matches the height of the plant above the ground. So if you let your grass get longer in the summer months, it will develop deeper roots and gather moisture and nutrients more easily at that depth.
Also, be sure to keep your mower in good repair. A well tuned machine uses the gas you put in it more efficiently and produces less smog, which is good for the environment. But by putting your mower in the shop early in the season, the mechanics can make sure there are no leaks of oil or gas that could get down into your turf and kill sections of your lawn. They can also make sure the blade is balanced to cut evenly for the entire span of the blade which is crucial for a smooth cut each time.
Consistency in maintenance is the heart of any good lawn care program. Along with a routine of mowing, maintaining a disciplined watering schedule keeps your lawn on a steady diet of moisture that is critical for growth.
Also, use a scheduled but restrained discipline for weed control and fertilizer. Apply applications every 2-3 weeks alternating weed killer and fertilizer but do not exceed that schedule or you will overwhelm your grass. If the weeds need more work than this schedule can provide, pull them by hand. This kind of attention to detail and discipline from you as a homeowner is the smart way of managing your yard and it will reward you with the healthy turf that you want to surround you throughout the year.
.
.
Home Price Index Lowest Since 2003
Single-family home prices ended 2011 on a downbeat note as a drop in prices in December sent the seasonally-adjusted index to its lowest level since 2003.
The S&P/Case Shiller composite index of 20 metropolitan areas declined 0.5 percent on a seasonally adjusted basis, in line with economists’ expectations, after falling 0.7 percent in November.
The 20-city index fell to 136.63, the lowest level since January 2003.
“After a prior three years of accelerated decline, the past two years has been a story of a housing market that is bottoming out but has not yet stabilized. Up until this latest report we had believed the crisis lows for the composites were behind us,” David Blitzer, chairman of the index committee at Standard & Poor’s, said in a statement.
“The pick-up in the economy has simply not been strong enough to keep home prices stabilized. If anything it looks like we might have re-entered a period of decline as we begin 2012.”
Prices in the 20 cities dropped 4.0 percent year over year, topping expectations for a drop of 3.6 percent.
For the fourth quarter, the national index fell 1.7 percent on a seasonally adjusted basis.
|
|
Home Inspections: Deal Breakers or Makers?
A home inspection is simply a visual examination of a house’s overall condition. The home inspection report describes a house’s physical shape and identifies what might need crucial repair or replacement. Although what’s covered in a standard report can vary by inspector, typically the status of the following will be included:
- heating system
- central air conditioning system
- interior plumbing and electrical systems
- roof
- attic
- visible insulation
- walls
- ceilings
- floors
- windows
- doors
- foundation
- basement
- all structural components.
A home inspection is not an appraisal, which determines market value, and it’s not a municipal inspection, which verifies local code compliance. Inspectors won’t survey inaccessible areas of home; they don’t do any kind of destructive testing — only non-invasive visual assessments. The report won’t include the condition of every nail, wire or pipe in the home. The report also does not guarantee a home’s components will never fail or need repair in the future.
So, what are the deal breakers of a home inspection? That depends entirely on you. What is and is not a deal breaker depends on each person’s preferences and needs. For example, an inspection that identifies damaged floor joists might be a deciding factor for one person who feels the problem is too expensive or time-consuming to fix.
However, the same trouble with joists might be absolutely acceptable for another client who has resources to fix the issue. A home inspector does not tell a customer whether or not to buy a house. Rather, it’s his or her job to provide all the available information so home buyers (or sellers) can make the decision that’s right for them.
If you’re thinking of buying a house and a home inspector finds problems with it, this doesn’t automatically mean you shouldn’t buy it. The findings simply mean you now know what you’re getting into. If the plumbing needs to be replaced in six months, at least you won’t be surprised when it happens. If major problems like this are found, the seller may agree to make the repairs. Of course, no house is perfect. It’s quite normal for a residence to have some glitches. It just depends on how many faults you’re willing to deal with before you walk away from the sale.
Home inspections differ based on the person or organization conducting them. The American Society of Home Inspectors (ASHI), for example, is not required to check for wood-destroying organisms or diseases harmful to humans, including mold or moldlike substances. Many inspectors offer services to check for these things, although some will charge an additional fee.
Besides having the right things covered in an inspection, you should also make sure you hire the right person for the job. Unfortunately, there’s no surefire way to vet an inspector’s complete history. However, there are a number of steps you can take to make an informed decision.
Consult your real estate attorney or ask friends, business acquaintances or professionals who understand the housing industry for a recommendation. If you already have someone in mind, ask the inspector for professional references and call the people on this list with specific questions about the inspector and the services provided. Before you hire someone, make sure you’re comfortable with him or her first. Have a conversation ahead of time and review sample reports to make sure you can understand them.
Besides checking with ASHI, there are other reputable resources such as the National Association of Home Inspectors (NAHI) and the National Association of Certified Home Inspectors (NACHI).
.
.T
Could Your Shaky Personal Finances Get You Fired?
According to a recent study by the Society for Human Resource Management, some 83% of HR professionals think personal financial challenges have at least some impact on employees’ performance. Those same HR professionals aren’t blind to economic reality — 80% of them believe employees at their organizations are facing more financial challenges than they were five years ago.
Though the consequences are unpleasant, the logic is fairly straightforward: If someone can’t maintain control of their own financial situation when their personal money is on the line, what would make them motivated to be a better steward of the company’s money belonging to nameless and faceless shareholders?
That said, at most companies, having personal money troubles are not a fire-able offense. But if your performance is slipping, the odds are slim that your boss will pick you for the next available role of increasing responsibility. If the company also has reason to believe money troubles are behind your performance slippage, you can expect significantly tighter scrutiny on whatever areas you do have any individual discretion over.
Is it fair to have career troubles just because you’re having money troubles at home? Probably not, but speaking frankly, whether it’s “fair” or not doesn’t really matter. It is what it is.
If you are having money troubles, the first step toward regaining control is to stop trying to put on flashy displays of wealth you don’t really have. You’re neither fooling nor impressing anybody by showcasing your spending, and your employer already knows what you make. Spending money faster than your boss knows you’re earning it is a major red flag and can actually invite more scrutiny, not less.
Even in less instantly obvious ways, taking control of your finances is largely a matter of understanding — and making tough choices — on how and where you spend your cash. Brown-bagging your lunch can easily save you between $20 and $40 a week versus eating out, and home-brewed coffee instead of a couple daily cups from the coffee shop can have a similar impact.
No matter how you choose to cut back, doing so will help you take control of your finances. And with control over your finances, you’ll gain the opportunity to stop the career death spiral that otherwise threatens to turn some short-term cash flow issues into a serious long-term problem.
.
.
Home Prices Fall More Than Expected
According to the closely watched S&P/Case-Shiller composite index, U.S. single-family home prices fell more than expected in November, highlighting the continuing struggle of the housing market to make a meaningful recovery.
Like most measures of the economy, the S&P/Case-Shiller home price index is not perfect. However, it has a critical shortcoming that almost no one talks about.
We already know the data comes in on a bit of a lag. The data doesn’t hit the database until the public filing after closing. But the closing may be months after the agreement between buyer and seller (and the banks that provide financing). Ultimately, the lag can be a long time (sometimes up to six months) between when a price is agreed upon, the mortgage is secured, the closing occurs, and the sale is recorded and available for public use.
The Case-Shiller index is based on closings. However, four to eight weeks from contract to closing is major lag. November home price data reflects September or October prices at contract, which is the more relevant measure for a home buyer or seller. In other words, it would be inaccurate for users of the Case-Shiller data to assume the monthly index data reflects monthly market prices without some additional lag.
Furthermore, the time from contract to closing may vary depending on the city, which would make the Case-Shiller indices even more problematic. Those using such data as the Case-Shiller index data need to be aware of exactly what the data is really saying.
|
|
Is Your Income High Enough For a Mortgage?
One of the biggest problems being faced by both potential buyers and homeowners seeking to refinance is being able to prove they have enough income to be able to meet the payments. Both homeowners and buyers should keep the following in mind:
First, the only income that counts as far as your banks are concerned is taxable income, a requirement that can cause problems for numerous self-employed people and others who have to deduct business expenses when filing their tax return. Expenses for things such as mileage, meals and entertainment won’t be counted by the bank, so be sure to take this into account and have all of your expense-related information ready.
Banks will look back over a two-year period to evaluate your income, but this doesn’t necessarily mean you should have been employed for two consecutive years. The main thing banks want to see is that the income you have now is going to remain at the same level, and so long as gaps in employment are explained adequately, this shouldn’t be a problem.
The debt-to-income (DTI) ratio is the main factor in whether or not the bank will think you can afford to repay the mortgage. Once the lender has established that a borrower’s income is regular and likely to remain the same, they will then look to the DTI to decide. Unfortunately, the DTI is fairly conservative these days, with banks usually requiring a score of no more than 43% to 45%, compared to the 60% to 65% we saw just a few years ago.
Those who have especially strong credit scores, or buyers that can make a significantly large down payment may find some wiggle room in terms of the DTI, but unfortunately banks are not very flexible when it comes to income qualification.
.
.T
10 Tips for Reducing Credit Card Debt in 2012
Credit card issuers are once again aggressively marketing their cards, especially to consumers with good or excellent credit scores. Many people are probably seeing more credit card solicitations in their mailboxes with attractive rewards and balance transfer offers. Consumers need to guard against running up large account balances and getting themselves in a financial pinch once again.
Here are ten tips for reducing credit card debt in 2012:
1. Understand that paying off debt won’t be easy. It took time to accumulate this credit card debt, and it will probably take even more time to pay it off. Do not get discouraged or give up. Eliminating debt and building a secure financial foundation for yourself or your family is worth the sacrifice.
2. Get an honest assessment of how much you owe for all credit cards debts. It may have been easier to pay the minimums without looking at the total amount that you owe, but misleading yourself only makes it worse. Write down a debt summary that includes the creditor, monthly payment, interest, balance due, credit limit and due date for each loan.
3. Contact your creditors to negotiate lower rates. The less money you pay in interest, the more money you use to pay off your bills. Unfortunately, negotiating lower rates for credit cards is now more difficult than several years ago but it doesn’t hurt to try. If your lender does not offer a lower rate, shop around for another credit card.
4. Pay off the card with the highest APR first. Continue to pay the minimum on your other cards until you pay off the card with the highest rate. Then focus your effort on the card next in line. After you pay off the card, keep it open, especially your oldest cards. Losing this available credit can lower your debt utilization ratio which could lower your credit score.
5. Pay more than your minimum payment. Your minimum payment is usually only 2-5% of your balance. At this rate, it will take you many years to pay off your debt. Start with the card with the highest interest rate and try to double your minimum payment.
6. Balance transfer offers are currently very attractive so consider transferring your balance to a card with a lower rate. If your rate is above 12%, look for a card that offers 0% for at least 12 months. To take full advantage of this 0% interest, pay as much as you can above the minimum payment each month.
7. If you have a credit card balance, stop using it for anything other than necessities. Use cash instead. If you carry a balance, you are paying interest for every purchase, including clothing, entertainment or dinner. Factor that in to each purchase. For example If your APR is 15%, ask yourself if the purchase is worth paying an additional 15% in interest per year. Paying with cash will not only save money on interest, but it will also reduce the amount you spend.
8. Pay your bills on time, every time. Not only do you have to pay a late fee, but late payments can also appear on credit reports. Negative information like this can result in lower credit scores and higher interest payments.
9. If you are surprised by your current rates, check your credit report. It may contain an error that lowered your credit score, causing creditors to increase your rates. If you find an error on your credit report, contact the credit bureau to report it. They must respond to your claim in thirty days or remove the information that is incorrect or unverifiable. You can dispute by mail, telephone, or online. If the corrected error results in a higher credit score, alert your creditors to this and ask for a lower interest rate.
10. If you are in danger of missing a payment, or defaulting on your credit card loan, contact your credit card issuer as soon as possible. Your issuer may work out a payment plan with a lower rate or monthly payment if it will help keep your account out of default. If the first person you speak with can’t help lower your rate or make adjustments to your account, ask to speak with a supervisor or someone who can. Persistence may be necessary to find the person who will help you. Explain that you are in debt, the steps you are taking to repay it, and what you can pay today. Document all conversations, including whom you spoke with, and the date, time, and the results.
Above all else, remember this: If you’re being charged 12.99% on your Visa card balance, and you’re earning 1% on your money market account, take money out of the money market to pay off the credit card faster. You’ll end up with an 11.99% return.
If you’re staggering under the weight of credit card debt and don’t have the cash to pay it off, consider getting help from a nonprofit debt management program, such as the one offered by the National Foundation for Credit Counseling.
.
.
Housing Market Strengthening
The year 2011 ended on a high note as economists anticipate some signs of recovery ahead. Prices appear to be reaching their trough, visible supply is on the decline, and banks are beginning – just slightly – to loosen lending standards, according to a fourth-quarter report from Capital Economics.
However, Capital Economics warns these positive signs do not point to an immediate recovery.
Taking into account the historic ratio between disposable income and housing prices, homes were undervalued by 23 percent in the third quarter. Homes have not been this undervalued since at least 1975.
Since 2006, prices have declined 33 percent, countering the sharp increases of the boom years. Therefore, “it is clear that prices don’t need to fall further,” Capital Economics says.
Non-distressed home prices in particular seem to have bottomed out. While home prices declined 4 percent this year, prices of non-distressed homes fell only 0.5 percent.
Having reached the bottom, however, prices will not jump far in the new year. Capital Economics predicts national home prices will remain unchanged over the next two years before seeing positive movement – a 2.5 percent increase – in 2014.
This past year has seen some positive movement in housing inventory with a 20 percent decrease in the number of homes listed for sale over the year. However, supply will remain an obstacle moving forward as the current shadow inventory is estimated at 4 million.
Demand will also continue to be an issue. However, the report notes the market has seen a slight increase in home sales, which it attributes to first-time buyers.
Banks are contributing to rising demand and supply absorption by allowing loans with loan to value ratios of 80 percent or even slightly higher, something that has not occurred since mid-2008, according to Capital Economics.
The overall economy will not help boost the housing market in the coming year as the U.S. will continue to be affected by the euro-zone crisis.
Everything seems to point to the rental market continuing to be the best-performing segment of the market in 2012.