Analysts Hopeful That 2012 Will Be Bottom for Real Estate Market
The downturn in the American housing market continues to sap strength from the U.S. economic recovery and in the process more and more firms related to the housing industry are trying to stay one step ahead of the avalanche. It’s no longer news that the housing market in almost every corner of the country remains at or close to the most depressed levels seen in many generations. While some areas have been hit much harder than others, all areas are finding that demand for existing homes, and new homes is barely moving the needle and the outlook isn’t getting any better.
The housing sector of the U.S. economy has been in a free fall since the bubble burst nearly five years ago. And while many industry analysts predict that the market has seen the bottom or that the bottom is likely to support the drop sometime in 2012, few if any are willing to go out on a limb to predict any recovery. In fact, many don’t see a turnaround for almost five years out. The most optimistic group of market watchers projects nearly 18.3% home price growth over the next five years while those not painting quite so rosy a picture are looking for a 1.4% decline in the market price for homes.
Analysts predications aside, the data still hasn’t been so encouraging with a recent survey finding that nineteen out of twenty cities in the U.S. saw a drop in home prices for the month of October, and the overall numbers for the previous October fell by 3.4%, just a few ticks above the 3.2% forecasted by economists. Some of the hardest hit areas remain Atlanta, Chicago, Cleveland, Minneapolis, and Detroit.
One of the biggest drags on home prices has been the problem with foreclosures and the question of how to best deal with the growing numbers of foreclosed houses on the market and how to remove this logjam from the path of what many government officials hope is a soon-to-be-on-the-mend industry. To this end, many cities are coming to the rescue and sweeping-in to buy foreclosed homes. This can be a smart move since the city can manage, sell, or even rent foreclosed properties, then spur development and remove blight. And the weight lifted from home prices will more than likely be worth the cost. This strategy is not without its risks and hazards and only time will tell if this was the best route for these cities to take. But, it’s not like there were a lot of other good choices.
Pre-sale inventory of foreclosed homes reached an all-time high of 4.29% of all active mortgages in October with November coming in just under that low at 4.16%.Going forward the number of foreclosures could increase dramatically as the Obama Administration’s foreclosure prevention campaign, the Home Affordable Modification Program, or HAMP, will soon be coming to an end. When launched in 2009, this program was designed to enable borrowers that meet eligibility requirements to avoid foreclosure by modifying loans to a level that is affordable for borrower and sustainable for the long term.
However, HAMP has been riddled with problems, especially poor performance by loan services in getting mortgage payments reduced for those who are qualified. Many also feel that HAMP lacks a full commitment by the government.
Unemployment is also a drag on the recovery the housing market and unless people start finding jobs at a much greater pace, real estate transactions, and the multiplier effect in the economy from these transactions, will have little positive impact on overall growth in U.S. GDP data. Like it or not, so goes the housing market, so goes the economy.
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