Finally, a bottom for home prices
Plenty of people would like to set up their own household. More affordable houses could bring them into the market.
Housing prices are expected to stop sinking in the spring. But recovery will be gradual — too slow to help the economy much this year. Look for prices, which have fallen an average of 31% since 2006, to drop an additional 2% or so in the early months of 2012 and then recover that lost ground by the end of the year.
The growth in 2013 won't be dramatic. Come 2013, expect home prices to rise 3% to 4%, not too far from the pre-boom average of 4.8% a year, but well short of the bounce that usually follows a housing slump. After the milder housing downturn in the early 1980s, home prices grew an average of 6.5% for six years.
A key signal that the bottom is near is a change in the ratio of average homes prices to personal income — houses are affordable again. After soaring to 4 to 1 during the housing boom, the ratio is now well below the long-term average of 3 to 1.
Another reason for optimism: Foreclosure numbers are set to level off after a recent surge to clear up the backlog that developed when banks were found to be rushing through the paperwork for seizing homes. Although the 3.5 million foreclosures still in the pipeline are weighing heavily on the housing market, that effect will diminish when it is clear that the worst has passed.
Look for home sales to tick up this year as well, hitting 5.5 million for new and existing homes. That would be a 4% increase from 2011, the low point since the housing bubble burst.
Demand from abroad will help. Canadians are buying homes in Phoenix, Brazilians are investing in Miami, and Chinese are buying in California, Las Vegas and New York City. To these investors with bulging pockets, good values can be found where the price declines have been greatest.
U.S. investors remain more conservative, largely avoiding single-family homes and diving into the multifamily rental market. It has heated up in recent years, thanks in part to the crowds of former homeowners who need a place to live, as well as to would-be homebuyers who are waiting to see if prices have further to fall.
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Home starts are expected to jump 15% next year, driven largely by construction of apartment buildings. Among the strongest areas are expected to be Texas, Louisiana, Oklahoma and the Dakotas, where the robust energy industry is lifting local economies and earlier overbuilding was avoided. Other states that have benefited from past restraint are Montana, Washington, Iowa and Nebraska.
- On our blog, 'Listed': Housing starts surge, and analysts see bottom
Even so, new construction is likely to be only around 750,000 in 2012, down from 2 million in 2005 and far below the pre-crash average of 1.5 million from 1959 through 2006.
Further down the road, there is plenty of pent-up demand. The lousy housing market has muffled the typical rate of household formation, deterring many young folks from getting their own homes. As a result, 2 million new households are waiting for an improvement in economic conditions: recent graduates eager to leave their parents' nests and couples in their 30s who have delayed marriage or having children. As the economy picks up steam, they will emerge, helping to soak up the glut of foreclosed homes and putting construction on a faster track.
By 2014, the housing market should start to look more like its old self, with housing starts near the long-term average of 1.5 million a year, sales of about 6 million and price gains of more than 4% a year.
Shorter term, even the modest reversal likely in 2012-2013 is crucial, easing the crushing weight the housing market has imposed on the economy. Homeowners, who lost a large share of their net worth in the housing crash, have been trying to rebuild their wealth by saving more in recent years. Since the market crash, consumers have held on to more than 5% of income, up from less than 2% during the housing boom. Since consumer spending accounts for two-thirds of economic activity, this uptick in saving and correlating downtick in spending has spelled the difference between a solid recovery and the shaky one the U.S. is experiencing.
- MSN Money: 2012 looks better for real estate
Because a good deal of this saving is due to uncertainty — not knowing just how much more home prices will drop — reaching a clear turning point is important. Once homeowners know the worst is over, they'll take a breath, start planning their saving for the long term and spend more in the short term.
Of course, the market shift won't make much immediate difference for the millions of homeowners who owe more than their home is worth. But for the majority with equity in their homes, even a modest gain in prices can change their spending behavior.
"There is nothing to fear but fear itself."
Franklin Delano Roosevelt
I think the worst of the fall in home prices is over. I see 1-2 years of small decreases ,stagnation if we are lucky, and then another 5-10 years of stagnant growth to small increases. This is an AVERAGE, some places are already increasing and some will see declines for 5 or more years and with no increase for as much as 10 years.
It has a lot to do with individual markets
If you want and can afford a house ,at least 10% down and 15 yr fixed with a reasonably safe income, go ahead and buy ,just realize you may be stuck with it for at least 5 years if not 10.
If you are not SURE, then waiting 2-3 years and saving up more money probably won't make much difference in either the price or the rates
Didn't the fed just come out and say they saw no signs of raising rates til 2014?
Projected growth in 2013 ?
Housing has hit bottom ?
I certainly hope that the poor folks who have had their: 401k robbed, their pension liberated and all hopes for retirement seemingly lost, are not fooled by this. America will rebound and housing prices will rise...but not this year, or next. The inventory is still way too high and, tens of thousands not placed on the market that have foreclosed.
The financial markets are still attempting to falsely raise prices in order to dump an over 5 year supply of homes. When this DOES happen,. all the poor folks who scraped together their last dime to take advantage of the media's new housing boom, will have their dreams crushed yet again when th shadow inventory is dumped on the market.
Have to go, the Easter Bunny is coming this afternoon to deliver early gift$ to all. Remember... you have to be wearing yellow today to get yours !! It's true, I read it in the newspaper...gotta go
Americans today, now have their backs to the wall, WE THE PEOPLE, need a change from the atypical two party paradigm that has besieged Washington since the inception of The Federal Reserve System, in 1913. Clearly, Ron Paul will be the Next President.
Simply and honestly,
Dr. Paul is simply reminding us of our God given rights that we were born with as Human Beings, hence thereby requiring from our virtues within each of our souls, prudent clarity, and focus in our logic, by:
• REDUCE the size of over bloated government,,
• ADDRESS the rancid pork barrel infestation of lobbying for political favors within the beltway, an over 5 billion dollar a year activity.
• ADDRESS our global military presence (and the exorbitant billions of spending that go with it),
• The constitutional redressing of States rights.
• RETURN of the gold and silver backed dollar.
• ELIMINATE worthless printing of the present inflated fiat Federal Reserve Currency.
• END the illegal presence of the neither Federal , which there are no reserves, because they print currency out of thin air then bill the taxpayer for it, to END THE FEDERAL RESERVE BANK !!!
• CUT $1 trillion in federal spending his first year in office.
• ELIMINATE five federal departments and return power to the states;
• BALANCE our out-of-control budget in only three years.
• FIGHT gun grabbers, Big Labor, and the reckless spenders at the Federal Reserve each time they try to ram through another power grab.
• MAINTAIN a fighting force that is second-to-none while refusing to surrender our national sovereignty to carry out the UN's decrees.
If Ron Paul is elected, he would have the moral authority and the mandate to have a zero rate tax rate, which would bring in an influx of offshore equity, assets, and corporations, back to America, of prosperity, un be known to any economy, in essence, the complete opposite of what we have now.
Remember now, for 140 years before 1913, America did exactly that. Wake up people and THINK about what you have just read.
To inform the esteemed author, but we have not come near the bottom yet.
The following are the obvious reasons:
1.) No jobs, or the continuation of unemployment, with no change on the horizon.
2.) The continuing downward spiraling of the Dollar, now exacerbated by the Fed's additional
proposed $1.3 Trillion bailout of Europe.
3.) The continued paradigm of the 2 party crony capitalism, that assures the two above will just
Hind site is 20/20 as they say. The run away Gov. backed Fred/Fanny crooks put the ball in motion and still haven't been reprimanded. The system got way out of hand allowing banks to finance 0% down and not having any personal investment tied into the loan/ accountability. Also driving the inflated housing market-Don't Forget the Realtor commissions... They push the housing market prices to the max on every sale in order to drive up their commissions. There's no more paper work involved in selling a 100,000 house than a 1 mill. house. If they can be capped a say 3 to 5 grand per sale then the inflated prices of homes wouldn't rise to the over priced market we see today. Yes, as we earn more they think we should pay more. Poor thought process.
You've got to be kidding. Bottomed out. Try the door has just opened and more are going down. I do not know where these "experts" come up on what We the people will be doing tomorrow.....I will believe it when I see it, and Not read it.....
there's always farther to fall - that is kind of funny...
still waiting on the zombie apokolypse
It IS ABSOLUTELY SCARY how many people are STILL in denial, like the writer of this article.
I understand that if you've been fortunate enough to have slipped through this Recession, and kept your job and gone unscathed. It's the typical, 'you dont understand unless you are in the midst of it.' As the saying goes.... 'It's a Recession if your neighbor is unemployed. A Depression if you are unemployed.' BUT, people, wake up. If you think the worst is over, and that you wont be next to get that pink slip, think again. Wake up!!!
I deal with this frustration in my almost 2 year long job search. I gets these fools, like career coaches and counselors, who try to sell their snake oil by luring desperate people to pay for their services. That the jobs are out there!! You are just not using the right techniques. OR, all you need to do is make a career change. Or go back to school (because my $60k of college 20 years ago was not good enough, maybe another $100k spent now will ensure me a job...yeah sure). I am smart enough to know, that no matter the industry, there is a plethura of unemployed EXPERIENCED workers willing to work for entry level wages....why would they need to hire someone new to an industry with no EXPERIENCE? Health care maybe an exception...but I am no nurse.
Granted, these career coaches, if they admitted to REALITY of no work out there, they'd be out of a job themselves. However, its just so wrong to think they are probably taking advantage of some very desperate people right now.
wouldn't be nice if the highest a CEO could get payed including bonuses is $1mil @yr maybe there would be enough in their reserves to service the customers instead of screwing them