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.
Home values in the U.S. declined slightly in October as the depreciation rate stabilized, but the market bottom likely will not hit until sometime next year after a drop of another 2 percent to 4 percent, according to the real estate research site Zillow.
According to Zillow’s latest market report, home values fell 0.3 percent in October compared to the previous month.
On a year-over-year basis, the Zillow Home Value Index declined 5.1 percent to $147,900. Home values have fallen 23.7 percent since their peak in May 2007.
Throughout the nation, 95 of the 156 metropolitan areas covered by Zillow saw monthly home value depreciation and 39 areas showed monthly home value increases. Twenty-two areas remained flat.
There are some somewhat positive signs in hardest hit areas. In Miami, home values were flat on a monthly basis, while Phoenix and Detroit both saw monthly gains of 0.2 percent and 1.0 percent, respectively.
Only ten metro areas saw home value appreciation on a yearly basis, with seven of those cities also having monthly appreciation.
The foreclosure liquidation rate continued to decline in October, with 8.1 out of every 10,000 homes in the country liquidated. This is down significantly from the record high of 10.7 out of every 10,000 in October 2010 – just preceding the “robo-signing” controversy and investigation into shoddy foreclosure paperwork by the biggest lenders.
Real estate professionals and economists who paid close attention to the monthly existing-home sales data provided by the National Association of Realtors were given a sharp shock recently when it was revealed in the Chicago Tribune that the association had been consistently reporting bad figures each and every month since January 2007, when the housing crisis really took hold.
NAR admits to ‘over-estimating’ existing home sales data.
As part of the trade association’s benchmark revision reporting, new data has allowed a more accurate depiction of the housing market, with home sales data being revised downward by 14.6 percent for 2010 while for the total period of 2007 to 2010, resale home sales were revised downward by 14.3 percent.
Lawrence Yun, chief economist at the NAR, explained that the association used the Multiple Listing Service (MLS) to track existing home sales. However, he pointed out that the MLS database is limited to data from sales listed by realtors only. Sales of homes listed by owners are excluded from the database, and so the MLS only provides a narrow view of real estate markets. He also pointed out that because the majority of homeowners use realtors, sales figures for realtor listed homes became artificially inflated.
Also, the NAR often made a number of assumptions each month, based on data from the 2000 Census, which is clearly outdated.
The bad data is particularly concerning because the US economy is so closely linked to the fortunes of its real estate markets, and real estate policies followed by both Congress and the Federal Reserve have been based in part of the NAR’s existing sales data.
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According to the U.S. Census Bureau, new home sales rose 1.3 percent in October from September and are up 8.9 percent from October 2010, and although the rate fell short of economists’ forecasts, improvement in the hardest hit sector is welcomed by new home builders in any form. The month ended with a 6.3 month supply at the current rate of sale and a median sale price of $212,300.
The National Association of Realtors (NAR) reported recently that existing home sales for October were up, while the number of homes on the market as well as prices are declining. With Freddie Mac reporting mortgage interest rates have dropped below four percent again, all of these indicators may improve November’s figures, despite weather conditions that often slow the market in select regions.
Additionally, the U.S. Commerce Department reported recently that single family housing starts rose 3.9 percent in October, but the improvement was masked by an 8.3 percent drop in multifamily starts that kept national housing production essentially flat in October up only 0.3 percent. Single family home permits issued rose to its fastest pace since December 2010, up 5.1 percent for the month, a forward-looking economic indicator that is used to consider what starts will look like in the future. The multifamily sector saw a 24.4 percent increase in permits issued, hinting at a continuing multifamily rollercoaster of volatility.
Housing starts for single family combined with multifamily was up 17.2 percent in the Northeast, 9.7 percent in the Midwest and 1.6 percent while starts dropped 16.5 percent in the West. Permits dropped in the Northeast 1.6 percent and 3.7 percent in the Midwest but rose 5.4 percent in the West and 21.5 percent in the South.
The number of foreclosures climbed in October, as mortgage lenders started to work through the paperwork problems that had delayed new filings for much of the last year.
Foreclosure filings were reported on 230,678 properties nationwide in October, a 7% increase from September, according to RealtyTrac, an online marketplace for foreclosed properties. Despite the increase, filings were still 31% below year-earlier levels.
RealtyTrac said one in every 563 U.S. homes had either a default notice, a scheduled auction or a bank repossession filing during the month.
The best hopes for stopping foreclosures is an improvement in the overall economy, especially the battered real estate and labor markets. But with so many foreclosed homes weighing on the market, and with unemployment still at 9% and consumer confidence low, even mortgage rates near record lows aren’t enough to fix the problems caused by the bursting of the housing bubble.