Is 2012 the year housing will recover?
The National Association of Realtors (NAR) thinks so. According to NAR, gradual improvement in the housing market is expected next year, with existing home sales edging up 4% to 5% and new home sales getting an even bigger boost off this year's record lows.
"Tight mortgage credit conditions have been holding back homebuyers all year, and consumer confidence has been shaky recently," Lawrence Yun, chief economist of NAR, said. "Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can’t continue indefinitely."
Yun, who made his comments during the annual NAR conference for real estate agents in Anaheim, Calif., projected mortgage interest rates would gradually rise from record 2011 lows to 4.5% by the middle of 2012. "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 homebuyers to take advantage of current opportunities."
With falling inventory in both the metro Denver market and nationally, the median home price should rise in 2012, he said. "Home prices have yet to show a definitive stabilization pattern in most areas. Still, given an over-correction (downward) in prices, there likely will be moderate appreciation in 2012.
"Accurately predicting the bottom of the housing market is like finding the proverbial needle in a haystack. But Yun is right, the fundamentals do bode well for a recovery in the near future. Interest rates are still at record lows, the inventory of homes on the market in metro Denver is at a 14-year low, unemployment is dropping locally and there are very few new homes being built while builders wait for definitive signs of a recovery. Add it all up and it makes the perfect environment for a market recovery. Exactly when it will happen no one knows, but all the ingredients are in place for the housing market to finally strengthen.