While 2011 has proven to be a bumpy year to date for the US housing market, the National Association of Realtors® expects that 2012 and subsequent years hold more promise.
Lawrence Yun, chief economist of the National Association of Realtors®, said home sales should be stronger. "Tight mortgage credit conditions have been holding back home buyers all year, and consumer confidence has been shaky recently," he 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. This demand could quickly stimulate the market when conditions improve."
The expectation is that GDP will grow modestly this year by 1.8%, and then will experience modest gains through next year- to the tune of about 2.2%. Yun also projects the high unemployment rate in the US to begin to decline. Furthermore, he expects mortgage rates to begin to climb back from currently historically low levels.
“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," Yun said. "Very favourable 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."
Yun forecasts existing home sales to edge up only slightly this year- by 1%, with a projection of another 4%-5% through 2012.
New home sales are expected to hit an all-time low in 2011, 302,000 this year, moving back upwards to 372,000 in 2012. "Although a double-digit growth in new-home sales and housing starts sounds encouraging, the projections remain historically soft relative to long-term underlying demand," Yun explained.
Furthermore, with a flood of inventory on the market, prices are expected to stay low, but as the stock gets absorbed, there is an expectation of price appreciation in 2012.
"Home prices have yet to show a definitive stabilization pattern in most areas. Still, given an over-correction in prices, there likely will be moderate appreciation in 2012," Yun said.
"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."
Published: Monday, 14 November 2011