Housing still matters to millions of Americans. And, the real estate lobby in Washington, D.C., which consists of the National Association of Realtors (NAR), the National Association of Home Builders (NAHB), and the Mortgage Bankers Association of America (MBA), would like to ensure that you continue to think about housing in a positive light, as the nation’s housing markets slowly crawl out of the gutter.
This year, the uncertainty caused by the fiscal cliff, a contentious presidential election, and a very slow-growing U.S. economy with Europe in deep recession, has created only the barest beginnings of a turnaround in the real estate market. Many local housing markets are still down 60 to 80 percent in terms of sales volume, though housing prices have begun rising.
For many sellers, lenders, appraisers, home inspectors, title and escrow companies and, of course, real estate agents, it was another very difficult year. The stabilization that so many industry observers had been looking for seems to have occurred this past year. But looking ahead, we are at the bottom of a very tall mountain that must still be climbed.
The good news is for home buyers and investors. If you’re buying a home to live in or to use as an investment, 2013 looks like it’ll be another terrific year.
Here’s a recap of what’s happened this year in the real estate market:
- Roughly 23 percent of homeowners are underwater or are nearly-underwater with their mortgages, according to third quarter of 2012 data from CoreLogic.
- Zillow estimates that U.S. homes gained $1.3 trillion in value during 2012, the first year of cumulative gains since 2006. The Case/Shiller Housing Index reported home prices rose about 2 percent in much of the country. Anything in positive territory is a big gain for homeowners.
- New home sales remain extremely low, with only an estimated 368,000 new homes sold in 2012, according to projections from the Department of Housing and Urban Development (HUD). Still, that’s up about 17 percent from a year earlier. The median sales price of new homes was $237,700 in October, due to the supply of new homes being very low. At the current rate of sale, the 147,000 new homes on the market would sell in 4.8 months, a historic low rate.
- But existing home sales reached an adjusted annual rate of 5.04 million in November, up 14.4 percent from a year ago, according to the latest figures from the National Association of Realtors. While NAR concurs that home values are rising, about 22 percent of home sales were foreclosures and short sales, which sold for deep discounts. Still, even the percentage of distressed sales is down from 24 percent a year ago. And the number of homes on the market is now as low as it was back in 2001.
- Millions of homes have received foreclosure notices this year, though the number of foreclosure notices is falling. In better news, Hope Now is reporting that nearly 6 million loan modifications have been done since 2007 through its network of more than 40 mortgage lenders.
- Mortgage interest rates fell in 2012 to new historic lows. As we went to press, you could get a 30-year loan for around 3.35 percent, a 15-year loan at less than 3 percent and a 10-year loan for around 2.85 percent. All of this assumes you have excellent credit and at least 20 percent equity in the property.
- And yet, despite ultra-low interest rates, millions of homeowners remain in financial jeopardy, unable to afford their payments, and unable to refinance because of declining or negative equity in their homes.
- The good news is that HARP 2.0 has kicked into gear, and as lenders get used to working with borrowers on these terms, more homeowners are qualifying for a refinance. (Go to MakingHomeAffordable.gov for details on a HARP refinance.)
- Another year has gone by with no ideas on what to do about Fannie Mae and Freddie Mac. Nearly two years ago, the government was required by law to introduce a plan on what to do with these secondary market behemoths. But political infighting and the depressed housing market has kept any new ideas from taking root. Now, everyone is engaged on the fiscal cliff, and Fannie and Freddie are starting to pay back the Treasury with all profits going to pay down the debt. We don’t expect much to happen here in 2013 either.
When we look back over 2012, it’s clear that the residential real estate ship has turned. But should the country fall back into recession, the small amount of progress made could easily reverse. The real number to watch is employment: without a good paying job that allows homeowners to afford their mortgage, it’ll be tough to generate the kind of strong housing market that Americans have come to rely on.