What was largely touted as a recovery year for our nation turned into a morass of political gridlock, credit downgrades, financial volatility, upstart protest movements and a sluggish jobs picture. The housing sector, in particular, did not see the recovery it should have. It was another transition year in what has become a more drawn-out bottoming process than most would like.
Let's face facts: There is no way to know for sure what the future holds. But a few important patterns emerged in 2011 that could clue us in. Key leading indicators are setting the stage for better times ahead and we are encouraged by these emerging patterns. There is a sense of momentum in the right direction.
Falling supply and rising demand suggest improving fundamentals. Distressed properties made up a sizable share of that demand, which prevented price gains. Although foreclosures continued to hinder a full-on housing recovery in 2011, many of them were sold, bringing supply of this price drag to a much lower level than in recent years. The path of least resistance is higher prices.
And remember that 2010 tax credit for first-time home buyers? Hindsight indicates that Washington was trying to catch a falling knife. The credit temporarily reversed the market’s natural tide, causing forecasters to prematurely declare that we’d hit bottom.
Make no mistake, the economy is on the mend. Layoffs have slowed, hiring has accelerated, fewer homes in financial distress are entering the market. It’s good to see that time still has a way of healing most wounds.
Housing demand has stabilized and a steadily expanding construction sector is generating the jobs needed to invigorate recovery. New jobs will drive housing demand and activate the widely-coveted “positive feedback loop.” Housing helps jobs which helps housing which helps jobs. You get the idea.
Additional labor market growth combined with record-low mortgage rates have bolstered purchase demand. Armed with cheap money, buyers took to the streets in 2011 and are expected to continue forging new households at a reasonable clip.
Listings Seller activity slowed during the year, both for traditional sellers and banks with distressed property inventory. The net result was a big reduction in the supply of available homes.
Sales Housing recovery won’t occur without consumer participation. In 2011, housing demand strengthened organically on its own, independent of government incentives. Closed sales were up 8.2 percent to 41,429 for the year.
Inventory No matter your personal beliefs or favorite type of Angry Bird, there’s no denying the fact that buyers have fewer choices from which to pick and sellers are facing less competition.
Prices Home prices remained depressed for most of the year and indeed ended the year 11.7 percent lower than in 2010. At $150,000, prices have come down roughly one third from their bubbly apex in 2007.
Higher. Increase. Positive. These are words we expect to use more of in 2012. The major factor constraining market recovery will not be with us forever. Lender-mediated inventory is a tar pit in the near-term, but it will soon be absorbed, removing the downward pressure on overall prices.
At the same time, housing doesn’t live in a vacuum. A number of local, national and global changes must take place to restore stability and confidence in the marketplace. For one, credit-worthy home buyers need access to mortgage capital. And although past policies temporarily dampened the natural ebb and flow of the market, a comprehensive housing policy framework is necessary to guide sustained recovery.
Source: Minneapolis Area Associating of Realtors
No comments:
Post a Comment